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Wednesday, January 02, 2008

Turkish GDP Q3 2007

Gross Domestic Product (GDP) increased by 1.5 percent in the third quarter of 2007 compared with the same period of 2006. This was obviously a slowdown, although the very low year on year performance owes a good deal to slowing growth in earlier quarters than to any special slowdown in Q3. Seasonally adjusted data, however, point to a 0.6 percent decline over the second quarter. Domestic demand gave a strong boost to GDP in Q3, while the public sector impetus slowed; the contribution of net foreign demand, however, was noticeably negative, and this is perhaps the most significant detail. While the lagged effects of the monetary tightening have continued, albeit at a weaker rate, temporary supply shocks in the agricultural sector have accentuated the slowdown in economic activity.

The nine months growth rate of gross domestic product in 2007 has increased by 11.6% to 468 212 million New Turkish Liras in current prices and 3.8% to 121.7 million New Turkish Liras in constant prices while - due to the rise in the value of the lira in comparison with USD - gross national product increased by 19.2% in dollar terms to 348 472 million USA dollar.

The contribution of private consumption demand to growth increased significantly over the third quarter, consistent. In seasonally adjusted terms, private consumption demand, which has grown modestly since mid-2006, increased by 2.3 percent in this period compared to the previous quarter, largely on the back of spending on durables and semi- or non-durables

The year on year growth rate of private final consumption expenditure in Q3 was 3.6, while government final consumption expenditure 6.4%, gross fixed capital formation 5.7%, exports of goods and services 7.5%, imports of goods and services 16.8% (all in constant prices).

On a more positive note, leading indicators for the fourth quarter point to a moderate recovery in economic activity. Industrial production grew by 7.9 percent year-on-year in October and was up markedly from September in seasonally adjusted terms.

Indicators for private consumption and investment demand also suggest a similar outlook. According to the seasonally adjusted data, following a downbeat reading in September, domestic sales of automobiles grew rapidly in the October-November period compared to the third quarter. The CNBC-e consumption index also exceeded its third-quarter average. Moreover, imports of consumer goods jumped in October compared to the same month last year. Seasonally adjusted domestic sales of white goods also rebounded in October but remained below the third-quarter average.

Despite a slowdown in machinery-equipment production, imports of machinery-equipment gained speed in October over September and also the preceding quarter. In addition, both production and imports in the electrical machinery industry increased significantly on a year-on-year and per quarter basis. Following a rebound in the third quarter, domestic sales of light commercial vehicles recorded high growth rates during the October-November period compared to the previous quarter. Imports of capital goods grew sharply by 41.3 percent in October on a year-on-year basis and seasonally adjusted figures point to a continued acceleration. In sum, leading indicators except for machinery-equipment production suggest that investments picked up in the fourth quarter on a yearly and quarterly basis.

Exports continue to expand owing to productivity gains and on the back of strong external demand. Preliminary data indicate that exports recorded a high growth rate in November in dollar terms. Nevertheless, according to quantity indices that exclude the price effect, real exports grew at a lower pace than real imports in the second half of the year. The strengthening demand for imported goods, particularly automobiles and commercial vehicles and other capital goods, signal that the contribution of net foreign demand to growth will continue to be negative in the last quarter.

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