The Crash of Economic Confidence in Turkey #TurkeyEconomy
In the larger picture, the government’s general approach to economic management will continue to weaken confidence as economic indicators will deteriorate further along with lira, when 1H2018 GDP growth will pave its way to a rapid economic contraction and a prolong recession thereafter.
Within the data released today by the Turkstat, the Economic Confidence Index in August posted a sharp drop by 9% compared to the previous month and decreased to 83.9 from 92.2. The decline in the economic confidence index stems from weakness in all sub-sectors. Among the consumer, real sector (manufacturing industry), service, retail trade and construction sector confidence indices, significant reductions are observed. The largest slide is already known to be problematic construction industry.
This bad performance of the Economic Confidence Index in August is due to continued deterioration in economic data, particularly inflation, and political stress, particularly in the face of US sanctions. Another reason for the deterioration is that bond interest rates have risen to the highest levels in recent years for the same reasons. Given that inflation will continue to rise in the coming months, it is difficult to find a basis for a robust recovery of confidence indices.
On the other hand, the lira against the dollar recovering partly from 7.0 to 6.3 level tells us that the rapid slide experienced in August Confidence Index might not repeat next month. But in the larger picture, the government’s general approach to economic management will continue to weaken confidence as economic indicators will deteriorate further along with lira, when 1H2018 GDP growth will pave its way to a rapid economic contraction and a prolong recession thereafter.
In August, the consumer confidence index is 68.3 (-6.5% monthly), the real sector (manufacturing industry) confidence index is 96.3 (-5.1% monthly), the service sector confidence index is 88 (-4.2% monthly), retail sector confidence index was 93.4 (monthly -4.0%) and construction sector confidence index was 68.8 (monthly -10.7%).
Originally published in http://www.paraanaliz.com/intelligence/crash-economic-confidence-turkey/