Q3 real GDP grew by a seasonally adjusted +0.4% q/q, after +1% in Q2 (revised down from +1.2%), and by +0.9% y/y (unadjusted). The latter marked the first increase after three quarters of y/y decline. As Turkey’s recession began a year ago in Q3 2018 at the peak of its financial crisis, base effects are now showing. Consumer spending grew by a modest +1.5% y/y in Q3 2019, also after three quarters of decline. Continued strong fiscal stimulus boosted public spending by +7% y/y (up from +3.4% in Q2). Fixed investment contracted for the fifth consecutive quarter, reflecting the much weakened financial position of companies owing to the sharp currency depreciation over the past two years, though the decline moderated to -12.6% y/y from -22.4% in Q2. The overall strengthened domestic demand also led to a +7.6% y/y increase in imports, after four quarters of decline, while export expansion slowed to +5.1% y/y (from +8.1% in Q2) so that net exports in Q3 made the first negative contribution (-0.9pp) to overall growth since Q1 2018. Looking ahead, we expect the modest recovery to continue in Q4 and next year and forecast full-year GDP growth of +0.1% in 2019 and +2.3% in 2020.
