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Summary of Document: Turkey: Rise in Unemployment Points to Slowing GDP

Core Content

This document is a report by Hakan Aklar, Chief Economist at Turk Ekonomi Bank A.S., analyzing the current state of the Turkish economy with a focus on unemployment trends and their implications for GDP growth. The report highlights the slowing economic activity and the factors that may mitigate a potential downturn.

Main Points

• Unemployment Trends:
  The seasonally adjusted unemployment rate in Turkey rose to 10.3% in April from 9.9% in March. The non-agricultural unemployment rate also increased, reaching 12.2% from 11.8%.

  • Total job losses in the non-agricultural sector were 14,000 in April, indicating a sharp deterioration in employment conditions.

• Sectoral Job Losses:

  • The construction sector experienced the most significant job losses, totaling 98,000 in March and April.
  • The service sector created only 6,000 jobs in April, a marked decline from 47,000 in March.
  • The industrial sector showed mixed signals, with 32,000 jobs created in April after 9,000 job losses in March.
  • Export sector activity has supported job creation in the industrial sector.

• Export Performance:

  • Strong demand from the EU has driven 21% year-over-year growth in exports to EU countries in the first five months of 2018.
  • Total exports rose by 7.9% y/y in the same period, indicating resilience in the export sector.

• Fiscal Deficit and Tourism:

  • The fiscal deficit expanded significantly, reaching TRY 46bn in the first half of 2018, with TRY 12bn in bonus payouts to retired people in June.
  • The tourism sector has remained robust, with 33.2% year-over-year increase in visitor numbers to 34.4 million in May and 32.3% y/y increase in tourism revenues to USD 24.2bn.

• GDP Growth Forecast:

  • The report forecasts 4.5% GDP growth for 2018, down from 7.4% in 2017.
  • This forecast is based on 7.4% y/y growth in Q1 2018, combined with support from exports, tourism, and fiscal policy.
  • Private demand, which accounts for 60% of GDP, is a key risk factor due to its sensitivity to currency volatility, high interest rates, and employment conditions.

Key Information

• Employment Deterioration: The increase in unemployment, particularly in the non-agricultural sector, signals a slowing economy.
• Export Resilience: Despite domestic order declines, export orders have seen a recovery, driven by strong EU demand.
• Fiscal Expansion: The expansion of the fiscal deficit is expected to partially offset the economic slowdown.
• Tourism Growth: The tourism sector has shown strong performance, contributing positively to GDP growth.
• Downside Risks: The report notes that private demand could weaken, posing a risk to the overall growth outlook.

Conclusion

The Turkish economy is experiencing a slowdown, reflected in rising unemployment and declining domestic orders. However, the report suggests that this slowdown is likely to be gradual rather than abrupt, due to support from exports, tourism, and fiscal policy. The forecast for 2018 GDP growth remains at 4.5%, but the report highlights the importance of monitoring private demand, which is a critical driver of the economy.

Legal and Regulatory Information

• The document is a marketing communication and not independent investment research.
• It is intended for Relevant Persons as defined by MiFID II and other regulatory frameworks.
• Confidentiality: The information is provided on a strictly confidential basis.
• Disclosures: The report includes important disclosures regarding options, ETFs, and convertible securities, emphasizing the risks involved in these financial instruments.
• Jurisdictional Restrictions: The document may not be eligible for sale in all jurisdictions or to certain categories of investors.
• Disclaimer: The information is based on public sources and is not guaranteed for accuracy or completeness. BNPP and its affiliates do not provide investment, financial, legal, or tax advice.

Charts Mentioned

• Chart 1: Unemployment rate (seasonally adjusted, %)
• Chart 2: Orders of manufacturing firms (seasonally adjusted, %)

Both charts are sourced from Turkstat and the Central Bank of the Republic of Turkey (CBRT), providing visual support for the employment and manufacturing trends discussed in the report.