Economic Outlook & Forecasts: April 2016

GROWTH IS SLOWING DOWN

Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

February statistics and partially March statistics point out opposite changes as in January. We observe that the increase in industrial production slows down while the revival in consumption is becoming apparent. Both productions of investment goods and passenger cars, as well as real sector confidence index all have declined whereas imports of investment goods significantly increased. We expect that the contribution of net exports to the growth will be limited and negative. Our estimates for quarter-on-quarter and year-on-year growth rates are, respectively, 0.4 percent and 3 percent. In addition, we predict the current account deficit to GDP ratio to be 4.3 percent and the gold-excluded ratio to be 3.9 percent.

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Economic Outlook & Forecasts: March 2016

SLOWDOWN IN FIRST QUARTER’S GROWTH

Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Following to the completion of December 2015 data, we present our 2016 1. quarter growth rate forecast along with our final 2015 4. quarter growth rate estimation in this month’s report. For the last quarter of 2015, we revise up our growth rate forecast from 0.6 to 0.8 due to the increase in industrial production.  Taking into consideration of the actual GDP announced in first three quarters and our GDP growth estimation for the fourth quarter, we expect that year-on-year GDP growth will be slightly over 4 percent. Moreover, we predict the current account deficit to GDP ratio to be 4.5 percent.

We estimate quarterly growth to be 0.5 for the 1. quarter of 2016. Also, we expect 2.3 percent of decline in annual growth due to base effect. Leading indicators of January and February point out that the rise in private consumption has weakened. Also, it is indicated that the relative stagnation of investments persists. Net exports contribute negatively whereas public expenditures contribute positively to GDP growth. Finally, we expect a decline in the current account deficit to GDP ratio for the first quarter of 2016.

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Economic Outlook & Forecasts: February 2016

MODERATE GROWTH IN THE 4TH QUARTER 

Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Even though 2015 December statistics pointed out opposite changes in GDP components, we preserved our forecast of 0.6 percent due to the compensative character of these changes. In December, regarding the components of GDP, the rise of private consumption keeps its relatively strong level and a recovery occurred in investments. However, we observe a decline in government expenditures (tightening in fiscal discipline) and the negative contribution of net export becomes more evident. Considering the actual GDP in the first three quarters and the forecast for the growth rate for the fourth quarter, we estimate the annual GDP growth as 4 percent. Also, we predict the current account deficit to GDP ratio to be 4.5 percent and the gold-excluded ratio to be 5 percent.

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Growth Evaluation: 2015

GROWTH IS DRIVEN BY DOMESTIC DEMAND IN 2015

Seyfettin Gürsel, Mine Durmaz and Melike Kökkızıl

Turkish economy grew by 4 percent in 2015 in parallel with Betam’s forecast. It is relatively higher compared to 2015 growth rate which was 2.9. Also, actual GDP growth rate is consistent with the forecasts of the Medium Term Programme. However, while the Medium Term Programme expected a “balanced” growth (increase in private consumptions and positive contribution of net export), it was realised as unbalanced. Private consumptions provided the highest contribution by 4.5 percent (3 percentage point). Second biggest contribution belongs to government spending. Public spending including public investments increased by 7 percent. Private investment growth remained limited by 2.7 percent. On the other hand, net export showed a negative contribution; export has decreased by 0.8 percent while import increased by 0.3 percent.

In 4th quarter, GDP grew by 0.7 percent compared to previous quarter which Betam predicted as 0.8 percent. Main source of 4th quarter’s growth is the positive inventory investment. While private consumptions recorded a limited growth, a significant recovery occurred in investments. After the recent elections, we observe a severe deceleration in growth of public spending. On the contrary, net export contributed negatively due to the declining export and the extensively increasing import.

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1.2 MILLION FEMALE-HEADED HOUSEHOLDS SUFFER FROM DEPRIVATION

Gökçe Uysal and Mine Durmaz 

The status of female-headed households is an important topic in terms of both gender equality and equality of opportunities for future generations. According to the 2014 wave of Survey of Income and Living Conditions data, two different profiles of female-headed households emerge: young and educated women with relatively strong attachment to the labor market and old and low-educated women living alone. Nevertheless, material deprivation is more common among female-headed households regardless of their profiles. It is evident that targeted policies are required to help female-headed households fight against poverty; however, women’s attachment to the labor market ought to be taken into account in designing these policies.

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THE EFFECT OF MINIMUM WAGE INCREASE WILL BE LARGELY OBSERVED AMONG YOUNG AND WOMEN

Seyfettin Gürsel, Gökçe Uysal and Melike Kökkızıl

In this research brief, the effect of minimum wage increase, which came into force by January of 2016, to the labor market is examined using an updated wage data of 2013-Household Labor Force Survey released by Turkstat.  It is observed that minimum wage increase will affect various groups in the labor force differently. More specifically, the data indicates considerable increases in the average wages will be observed especially among the young age 15 to 24 years and partically among women. Nonetheless, it is probable to cause adverse events such as informality and unemployment in these groups, of which unemployment and informality rates are relatively higher.

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Labor Market Outlook: April 2016

DECREASE IN NONAGRICULTURAL UNEMPLOYMENT

Seyfettin Gürsel, Gökçe Uysal and Melike Kökkızıl 

Seasonally adjusted labor market data shows that, compared to the previous period, nonagricultural unemployment rate increased from 12.3 percent to 12.1 percent (0.2 percentage points) in the period of January 2015. Betam’s forecasting model had predicted a 0.1 percent decrease for this period. We expect that the nonagricultural unemployment will continue to decline in the period of February 2016. A 95 thousand-employment increase in the services sector drives the decrease in nonagricultural unemployment. Employment declined in manufacturing by 11 thousand. The data released by Turkstat indicates that increases in female labor force and female employment are stronger relative to those of males in the period of January 2016 compared to the same period in the previous year. The increase in the number of females who are unemployed in nonagricultural sectors results from a faster increase in labor force than that in employment. For males, the increase in labor force was faster than that in employment, thus the number of males who were unemployed decreased in non-agricultural sectors.

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ONE THIRD OF CHILDREN LIVE IN SEVERE MATERIAL DEPRIVATION

Seyfettin Gürsel, Gökçe Uysal and Selin Köksal

According to the European Union (EU)’s material deprivation definitions, approximately one third of children, in other words more than 7 million children are living in households that suffer from severe material deprivation. Compared to European countries, the rate of children living under severe material deprivation is higher in Turkey than in some countries with lower levels of GDP per capita as well as in countries that were seriously affected by the Great Recession. The problem of child material deprivation becomes more severe in the eastern regions of Turkey. More than half of the deprived children reside in the area covering the Mediterranean, Northeast Anatolia, Central East Anatolia and South East Anatolia regions. A closer look at the components of severe material deprivation reveals that three quarters of children are deprived from a one-week holiday away from home and more than half of the children live in households that do not own a car. In addition, almost 40 percent of children cannot meet their protein needs sufficiently since they cannot afford a meal with meat, chicken or fish every other day. As a result, Turkey is in urgent need of more efficient social policies fighting severe child material deprivation.

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Labor Market Outlook: January 2016

INCREASE IN UNEMPLOYMENT

Seyfettin Gürsel, Gökçe Uysal and Mine Durmaz

Seasonally adjusted labor market data shows that, compared to the previous period, nonagricultural unemployment rate increased from 12.5 percent to 12.7 percent (0.2 percentage points) in the period of October 2015. Seasonally adjusted nonagricultural labor force and nonagricultural employment increased by 118 thousand and 54 thousand respectively and, thus the number of nonagricultural unemployed increased by 64 thousand in this period. Betam’s forecasting model predicts that seasonally adjusted nonagricultural unemployment rate will remain constant at the level of 12.7 percent in the period of November 2015.

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REGIONAL EFFECTS OF THE MINIMUM WAGE INCREASE

Seyfettin Gürsel, Gökçe Uysal and  Melike Kökkızıl

This research brief aims to estimate the possible effects of a relatively high increase in minimum wages to wage distribution. The 2013 micro dataset of Household Labor Survey was used in the analysis. The earning data indicates that, by November of 2015, 57.3 percent of formal, full-time wage-earners working in private sector, i.e. more than half of the wage-earners in Turkey are receiving a monthly salary less than expected net minimum wage. When the regional disparities in the labor market are considered, the wage shock is expected to increase average wages moderately in certain regions (high-wage regions) and significantly in the others. When the minimum wage increases to 1300 TL, the regional median wages are expected to rise to 1300 TL, except in Istanbul and Ankara. In other words, we expect a considerable increase in the wages and this increase to have an effect on more than half of formal and full-time wage-earners working in private sector. No doubt that in Turkey, which has low rates of labor force participation, the minimum wage hike will encourage participation in the labor force. On the other hand, increases in labor costs following the minimum wage hike will also strengthen firms’ incentives to create informal employment.

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