THE CONTRIBUTION OF NET EXPORTS TO GDP GROWTH IS NEGATIVE

The Turkish economy grew by 3.5 percent in the last quarter of 2022. Thus, the annual growth for 2022 was recorded at 5.6%. Private consumption was the key driver of the growth, accounting for 9.1pp. The contribution of net foreign trade (0.7pp in the previous quarter) was -5.7pp. Changes in inventories pulled the growth down by 1.8pp. According to the seasonally and calendar-adjusted series, the Turkish economy grew 0.9% on quarter in the last quarter of 2022. While private consumption contributed 3.1pp to quarterly GDP growth, net foreign trade’s contribution was -2.0pp. Investments pushed the quarterly growth by 1pp, while the changes in inventories drove quarterly growth down by 1.2pp.

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Economic Growth in the Fourth Quarter

In light of the fully-released November and partly-released December leading indicators, we expect GDP to increase by 3.1 percent year-on- year in the last quarter of 2022. According to seasonal and calendar- adjusted data, we forecast quarter-on-quarter GDP growth to be 1.3 percent.

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Turkish Economy Shrinks in the Fourth Quarter

In light of the fully-released October and partly-released November lead- ing indicators, we expect GDP to decrease by 1.7 percent year-on-year in the last quarter of 2022. According to seasonal and calendar-adjusted data, we forecast quarter-on-quarter GDP growth to be 1.2 percent.

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INVESTMENT IS DECREASING

The Turkish economy has grown by 3.9 percent in the third quarter of 2022. The biggest contribution to the growth has come from private consumption, with 10.8 percentage points. The contribution of net foreign trade, which was 3.9 percentage points previous quarter, has been 0.7 percentage points. Changes in inventories have pulled the growth down by 8.3 percentage points. According to the seasonally and calendar-adjusted series, the Turkish economy has shrunk after nine quarters. Despite the 2.4 percentage point contribution of private consumption, net foreign trade’s contribution has been minus 2.5 percentage points. Changes in inventories and investments drove quarterly growth down by 0.8 and 0.6 percentage points, respectively.

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SHARP INCREASE IN FEMALE UNEMPLOYMENT RATE

Since the number of unemployed persons increased by 57 thousand and the number of employed persons increased by 229 thousand, the labor force grew by 286 thousand. As a result, the unemployment rate increased by 0.1 pp to 10.2% from September to October.

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HIGH INFLATION HAS ERODED THE MINIMUM WAGE RISE

In this brief, we examine the effect of the minimum wage increase on the purchasing power of individuals by comparing the increase that took place in January 2022 with the increase of  January 2016. Although the minimum wage increase enhances consumers' purchasing power and protects consumers from the adverse effect of price increases, the data shows that the increase in the first half of 2022 has significantly melted due to the striking inflation. It is clear that the significant price increases in food, electricity, gas, and other fuels, which take up a large part of the consumption basket of the poor, have eroded the minimum wage increase in the first half of the year.

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Quarter-on-Quarter Growth is Negative

In light of fully-released July, August, and September leading indicators, we expect GDP to increase by 4.3 percent year-on-year in the third quarter of 2022. According to seasonal and calendar-adjusted data, we forecast quarter-on-quarter GDP growth to be -0.3 percent.

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THE END OF 2-YEAR-LONG INCREASE IN MANUFACTURING EMPLOYMENT COUPLED WITH THE DECREASE IN LABOR FORCE AND UNEMPLOYMENT

According to the seasonally adjusted data, the number of employed persons increased by 123 thousand compared to the previous quarter and rose to 30 million 787 thousand in 2022 Q3, and the unemployment rate decreased from 10.7% to 10.0% following the decrease in the level of unemployed by 234 thousand. QoQ employment growth was 0.4%, implying a substantial deceleration in the employment growth. The deceleration in the employment growth is in line with the predictions that the QoQ economic growth will slow down.

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THE REVERSAL IN THE FOUR-MONTH-LONG DECLINE IN THE UNEMPLOYMENT RATE

Since the number of employed persons decreased by 54 thousand and the number of unemployed persons decreased by 120 thousand, the labor force increased by 67 thousand from August to September. As a result, the unemployment rate increased by 0.3 pp to 10.1%.

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Growth Decelerates

In light of fully-released July and partly-released August leading indicators, we expect GDP to expand by 3.9 percent on a year-on-year basis for the third quarter of 2022. According to seasonal and calendar-adjusted data, we forecast quarter-on-quarter GDP growth to be -0.7 percent. Thus, we expect the positive quarterly growth trend since the pandemic shock in the second quarter of 2020 to be replaced by a contraction. We expect the annual growth, which was constantly above 5 percent in the same period, to decrease slightly. International organizations such as the OECD and the World Bank revised their 2022 growth forecasts for Turkey upwards in their latest forecasts.

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