Newsletter Turkey February 2018

Economy

Overview of Monthly Data

Growth Rates

Inflation

Inflation continues to decelerate
In January 2018, consumer prices in Turkey increased by 1.02% in comparison to the previous month, and by 10.35% over the same month of the previous year (YOY). The highest monthly increase was registered in miscellaneous goods and services (2.96%), followed by furnishing and household equipment (2.44%). The highest monthly decrease took place in clothing and footwear (-6.02%). The highest annual increase was in transportation (16.02%). The domestic producer price index (D-PPI) increased by 12.14% YOY, and 0.99% monthly.
Feb. 5, 2018

10.3% unemployed in November
In November 2017, 3.3 million people in Turkey aged 15 and older were officially out of work, 440,000 less than in the same month of 2016. The unemployment rate was 10.3% with a 1.8-point decrease YOY. The youth unemployment rate in the 15-24 age bracket decreased to 19.3%. The labour force participation rate rose to 52.8% in total, and to 33.8% for females. Of those with employment in this period, 54.6% were employed in the services sector, 19.2% in industry, 18.6% in agriculture, and 7.6% in construction.
Feb. 15, 2018

Foreign trade deficit soars 36.8% in 2017
In December 2017, Turkey’s exports increased by 8.6%, while imports increased by 25.4%, YOY. With exports increasing to USD 13.9 bn and imports increasing to USD 23.1 bn, the trade deficit soared 63.5%, up to USD 9.2 bn. Accordingly, the annual volume of exports increased by 10.2% to USD 157.1 bn, imports increased by 17.7% to USD 233.8 bn, and the foreign trade deficit increased by 36.8% to USD 76.7 bn. The rise in exports was thanks to the increase in exports of motor vehicles, steel and machinery, whereas rise in imports was due to the rise in imports of gold, metals, mineral fuels and oils. In December, the main partner for exports continued to be Germany (USD 1.3 bn), trailed by the UK (USD 827 mn), Italy (USD 771 mn), and Iraq (USD 771 mn). Germany was also the country most of Turkey’s imports came from (USD 2.2 bn), slightly ahead of China (USD 2.1 bn), and followed by Russia (USD 1.9 bn) and the USA (USD 1.2 bn).
Jan. 31, 2018

Central Bank keeps policy rate stable
The Central Bank of the Republic of Turkey has left the overnight lending rate at 9.25%, the one-week repo rate (policy rate) at 8.0%, and the late liquidity window lending rate at 12.75%. The bank reported that the economic activity maintains its strength, domestic demand keeps improving, and external demand contributes positively to exports. The high inflation and inflation expectations create a risk on pricing behaviour; hence, the bank has decided to maintain the tight monetary policy.
Jan. 18, 2018

 

Politics

Turkey launches operation in Syria
Turkey has launched a military action dubbed “Operation Olive Branch” to clear the Afrin border region in northwest Syria of the predominantly Kurdish YPG militia, which Ankara considers to be the Syrian branch of the PKK and a threat to its national security. Turkish President Recep Tayyip Erdoğan stated that after Afrin, the operation will be extended to the Manbij region further eastward. Turkey’s Prime Minister Binali Yıldırım has assured that the aim of the operation is to clean the region from terrorists and that Turkey has no intention of an invasion. Heather Nauert, spokeswoman for the United States Department of State, stated that Turkey’s concerns about PKK are legitimate, but Turkey should focus on fighting against ISIS instead of other groups. Turkey has demanded that the USA stops its training and armament support to YPG, publicly threatening force even against U.S. troops.
Jan. 20 – 31, 2018

Former Halkbank manager found guilty by U.S. court
In his trial in the U.S., Hakan Atilla, former Deputy General Manager of Turkish state-owned bank Halkbank, has been found guilty of five counts, including breaching international and U.S. sanctions against Iran, and committing bank fraud. According to Bekir Bozdağ, the Turkish government’s spokesman, the ruling is contrary to international law, and evidence of the collaboration between the U.S. justice system and the so-called Fethullah Terror Organisation (FETÖ).
Jan. 4 – 5, 2018

State of emergency extended for the sixth time
The majority of the Turkish parliament has granted the government’s request to extend the state of emergency for another three months as from January 19, 2018. Accordingly, the total duration of this ostensibly temporary measure, which had been introduced as from July 21, 2016 following the coup attempt, which grants the government extraordinary powers not only in the fight against terrorism, will reach 21 months.
Jan. 18, 2018

Netherlands withdraws ambassador to Ankara
The Dutch government has now officially withdrawn its ambassador to Ankara after the diplomat was barred from the country following the incidents that happened last year. It has been also stated that the Netherlands will not issue permission for the appointment of a new Turkish ambassador. In March 2017, permission for a rally to be held in Rotterdam by a Turkish Minister had been denied, and Dutch police blocking off the Turkish consulate clashed violently with protesters of Turkish origin. Following the incidents, Turkey sent two diplomatic notes to the Netherlands, requesting an official apology. The diplomatic ties between two countries shall remain intact at the level of chargé d’affaires.
Feb. 5, 2018