The Outlook

The graph below depicts the 3-month moving average changes in exports, imports, and industrial production.

Following the interst hikes of the Central Bank in June, there are signs of slowdown in consumption. The industrial production piked in July and has been gradually lost momentum ever since. If the exports remain strong, the economy may end up with a 5-6 percent growth for the second half of the year. Otherwise I expect a 3-4 % growth.

Turkey - Country Forecast

"Economic growth has been strong so far in 2006, but a sharp weakening of the lira in May-June, accompanied by higher inflation and monetary tightening by the Central Bank of Turkey, will lead to a slowdown in the second half of this
year and the first half of 2007. GDP growth is forecast to be 4.5% in 2006 and about 4% in 2007. " (Economist, August 21 2006).

Yogi Berra once said "Prediction is very hard, especially about the future!"

But, come on! Just look at the statistics as of Aug 15 for God's sake.

• First quarter GDP growth rate was 6.4 percent.
• Second quarter industrial production (released on Aug 8) is 9.3 percent (it was 3.5 percent in the first quarter).
• Based on this information, one can easily predict that second quarter growth will be 9-10 percent.
• This means that in the first half growth rate will be around 8 percent.
• For the remainder of the year, the country should fall into a sudden and severe recession (that nobody expects, even the Economist) to get 4.5 percent average growth rate in 2006.
• A more reasonable estimate (say 3-4 percent for the second half) would give us around 6 percent rate for the year.

Of course, this is the same magazine that predicted a recession in Turkey at the beginning of 2004 ...the growth rate, it turned out, ended up 9 percent.

Update (Sep 13): GDP growth: 2006Q2: 7.5%, 20061H: 7.0%