The Turkish economic confidence figures for this month pointed towards a brightening outlook for the country’s economy, boosted mainly by a growth in confidence among retailers and service providers.
Turkey’s economic confidence index for December 2024 released on Monday morning, inching up to 98.8, from 97.1 in November, according to the Turkish Statistical Institute. This was mainly because of improving service providers’ confidence, which rose to 113.6 in December, from 111 in the previous month.
Confidence among retailers also edged up to 113 this month, from 111.7 in the previous month, whereas constructors’ confidence jumped to 89.4 in December from 87.8 in November.
Coming to consumers, confidence rose from 79.8 in November to 81.3 this month.
However, manufacturers’ confidence decreased to 102.7 in December from 103.4 in the previous month.
The New Year’s first inflation data was released by Istanbul of Chamber of Commerce, which shoed retail inflation at 1.74%, hinting at a substantial deceleration in trend inflation. The official data is to be released by Friday, where the consensus is 1.65%. Yet, inflation is very likely to jump in January data because of automatic tax hikes, in particular to gasoline and the 30% minimum wage hike.
On the production side, the composite PMI published by pro-AKP business association MUSIAD revealed the headline exceeding 50 first time in five months at 51.3, up by 3.2 points vs November. Yet, manufacturing and services output remained lackluster.
November trade deficit rase to $7.5 bn for the month, as exports registered a 2 point decline, but annually foreign deficit declined by 24%. Daya may be distorted, as importers might have rushed orders to avert new year’s traditional tax hikes.
Euro news: Is the Turkish economy looking up?
The Turkish economy has taken a severe battering over the past few years, as the Covid pandemic, soaring inflation, a widespread cost of living crisis and dampening industrial growth all took their toll.
In October 2022, Turkish inflation reached a 24-year high of 85.5% and was still considerably elevated at 47.1% in November 2024. This was largely due to the Central Bank of the Republic of Türkiye slashing interest rates under the guidance of Recep Tayyip Erdoğan.
Erdoğan believed that a looser monetary policy helped curb inflation, an economic belief which was at odds with other major central banks. This strategy also had a considerably negative impact on the Turkish lira, as well as causing other widespread damage, such as soaring rental and food prices.
PA Turkey: Still too hot for comfort
The composite PMI reveals domestic demand growth at levels that is not consistent with Central Bank’s premature rate cut. Turn-of-the year wage, salary and pension hikes will spill into higher expenditures and most likely to another bump in inflation. Given that CBT is expected to cut rates throughout 2025, and with no major new tightening in fiscal policy the outlook for inflation remains bleak. On the other hand, growth and employment will hold up, which is good news for Erdogan. The best news is the shrinkage in current deficits, which are projected to close 2024 at 1% of expected GDP, supporting the strong TL policy.
At the end, Turkey is looking forward to an average year, where inflation will anger the voters, but lower rates, robust employment and a strong TL works in favor of Erdogan.
PATurkey
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