Turkey

Economic Outlook
First quarter 2020

February 2020

Key messages
Risk-off mood due to global
concerns over 2019-nCoV
Global Commercial
tensions in pause after
the US-China Agreement
Counter-cyclical policies
in place led by expansive
monetary policy
Limited Financial Volatility
due to Central
Banks actions
Controlled commodity
prices despite
geopolitical uncertainty
Turkey’s recovery is
accelerating. Some
moderation in
consumption, more
signals on investment to
catch-up
Change in growth
composition in favor of
Domestic Demand with
declining support from
external demand
Temporary rise in inflation
in 1Q20. We expect
inflation to be 8.5%
by end 2020 unless
geopolitical shocks arise
Turkey Economic Outlook 1Q20 2
Economic policies will We maintain our
be more supportive. Exchange Rate
The CBRT may assumptions with
continue to reduce neutral real changes
policy rate to one digit
at the end of 2020 Potential risks from
Geopolitics and looser
We expect Fiscal policies might be
Policy to be neutral balanced by economic
with a Budget Deficit to recovery and still
GDP at near 3% in moderate Current
2020 Account Deficit
Complacency should New Regional
be ruled out as Geopolitical
lower than expected Positioning entail both
growth can trigger risks and
policy slippages opportunities
Contents
01 Global Outlook: Moving towards a soft-landing
of global growth, amid high uncertainty

02 Turkey Outlook: Stabilization in financial markets,

activity adjustment gains momentum

03 Turkey: Baseline Scenario

01
Global Outlook
 Turkey Economic Outlook 1Q20 5

Global Outlook support a soft landing scenario in Global Growth

COMERCIAL CONTRACYCLICAL LIMITED CONTROLLED

TENSIONS: POLICIES: FINANCIAL COMMODITY
IN PAUSE IN PLACE VOLATILITY PRICES

US-China Agreement: Monetary Policy will Limited financial Moderate Oil

Phase I Deal remain expansive, volatility due to Prices on weak
after recent interest the action of demand (Brent,
Protectionism will rate cuts Central Banks 61 USD in
continue to worry, 2020-21)
in other regions too The Fiscal Stimulus With Moderated
limited in Europe and Risk Appetite but Relative Weak
The Brexit will be higher in China with some Demand and
less disruptive in disruptions from Increase in “no
the short term 2019-nCoV OPEC” Supply
 Turkey Economic Outlook 1Q20 6

Global Growth remained relatively low during 2019

GLOBAL GDP GROWTH (*) The world economy expanded at a

(%Q/Q) quarterly rate of about 0.75% in 2019,
1,2
lower than in previous years

1,1 In addition to high uncertainty, China's

1,0
structural moderation and the US
cyclical slowdown have played a role
0,9
In any case, global growth was slightly
0,8
higher than expected in the second
0,7 half of the year
0,6

0,5
dic-18

dic-19
mar-15

dic-15
mar-16

dic-16
mar-17

dic-17
mar-18

mar-19
jun-15

jun-16

jun-17

jun-18

jun-19
sep-15

sep-16

sep-17

sep-18

sep-19

(*) Forecasts based on BBVA-GAIN Model.

Source: BBVA Research
 Turkey Economic Outlook 1Q20 7

Global Growth: A soft moderation in major economies

GDP GROWTH
(%)

USA EUROZONE CHINA*

* The impact of 2019-nCoV will depend on how long the

epidemic will last. Our baseline scenario with 60% probability
Source: BBVA Research drags down 0.3pp from 2020 GDP growth estimate.
 Turkey Economic Outlook 1Q20 8

Pause in the Fed & BCE: No change in rates in the horizon

FED & ECB: OFFICIAL INTEREST RATES (*)

Fed: the relative resilience of the
(%, END OF PERIOD) economy improves the balance of risks
3,0 and general conditions for a monetary
long term
2,5

2,0
ECB: the stabilization of growth and
1,5 the continuing signs of the new
1,0 presidency reinforce expectations of
0,5
interest rate stability
0,0

-0,5

-1,0
may.-15

may.-16

may.-17

may.-18

may.-19

may.-20

may.-21
ene.-15

ene.-16

ene.-17

ene.-18

ene.-19

ene.-20

ene.-21
sep.-16

sep.-17

sep.-18

sep.-19

sep.-21
sep.-15

sep.-20

Fed BCE
(*) Deposits for the ECB in case of the ECB.
Source: BBVA Research
 Turkey Economic Outlook 1Q20 9

Oil: Price moderates despite the increasing tensions

in the Middle East
OIL PRICE Increased supply in "non-OPEC"
($ PER BARREL , ANNUAL AVERAGE) countries in a context of lower
Actual Previous demand supports the prospect of
price moderation

71 Forecast for 2020 adjusted upwards

64 64 by further OPEC production cuts
61 61
57 Escalating tensions in the Middle East
54
represent a risk: a crude oil price of
$70 in 2020 could reduce world
growth by one to two tenths, with a
stronger impact in Europe

2017 2018 2019 (p) 2020 (p) 2021 (p)

(p) Forecast.
Source: BBVA Research
 Turkey Economic Outlook 1Q20 10

Global Risks: Lower cyclical risks but still high structural ones

EUROZONE
USA Economic
Economic Recession
Recession Periphery
Spread
Yields CHINA
tensions
adjustment
Dis-orderly
due to
Deleverage
higher
inflation

Transversal Risks
Prorectionism &
de-globalization

Geopolitical Tensions

Secular Stagnation in
Western Economies
Probability Changes
+ Global Severity - vs. last Quarter Climate Change
02
Turkey
Economic Outlook
 Turkey Economic Outlook 1Q20 12

The “V” recovery will continue in the coming months.

We upgrade GDP growth to 0.8% and 4% for 2019 & 2020 respectively
TURKEY: GDP GROWTH TURKEY: BBVA-GB GDP MONTHLY INDICATOR
(%YOY) (% YOY, 3M MOVING AVG.)

2019 2020
15% BBVA-GB GDP Growth (Monthly)
GDP Growth
M ean Jun Jul Aug Sep Oct Nov Dec Jan
13% GDP growth nowcast
Industrial Production 6.5 -3.3 -3.0 -3.6 0.9 2.1 3.8
Non-metal Mineral Production 4.8 -19.5 -18.9 -18.9 -15.2 -10.6 -5.1
Electricity Production 4.2 1.3 -0.3 -1.6 -1.6 -0.3 -0.5 -0.4 0.5 10%
Auto Sales 2.8 -45.5 -47.1 -37.3 -22.1 47.7 44.6 25.3

Tourist Arriv als 6.7 16.6 15.2 15.8 17.2 15.8 15.0 13.3 8%
Number of Employ ed 3.2 -2.8 -2.8 -2.7 -2.5 -2.2
Number of Unemploy ed 4.7 32.2 30.3 28.4 26.1 21.5
5%
Auto Imports 4.1 -53.6 -55.0 -47.4 -35.4 33.7 36.4 18.9
Auto Exports 7.7 -8.2 -6.8 -3.7 -1.9 -3.1 -6.2 -2.2
3%
Retail Sales 5.2 -3.9 -3.1 -3.1 -0.9 2.0 5.8 6.1 6.9
Manuf acturing PMI 50.9 47.9 46.7 48.0 50.0 49.0 49.5 49.5 51.3
0%
Total Loans growth 13-week 17.7 0.4 3.9 2.0 10.2 13.4 22.9 18.4 20.4
Real Sector Conf idence 105.6 102.5 98.3 102.5 98.8 100.9 102.0 103.6 104.1

2.4% 3.7% 3.7% 4.8%

-3%
MICA Forecast
GDP Y oY -1.6% 0.9%
-5%

Sep-16

Sep-17

Sep-18

Sep-19
Mar-17

Mar-18

Mar-19

Mar-20
Dec-16

Dec-17

Dec-18

Dec-19
Jun-17
Jun-16

Jun-18

Jun-19

Jun-20
Co ntractio n Slo w-do wn Gro wth Boom

Source: BBVA Research Turkey

 Turkey Economic Outlook 1Q20 13

The pattern of Re-balancing: Strong Consumption, Investment

recovery and negative contribution from External Demand
TURKEY: PRIVATE CONSUMPTION* TURKEY: TOTAL INVESTMENT* TURKEY: NET EXPORTS
(%YOY, 3M MOVING AVG) (%YOY, 3M MOVING AVG) (% CONTRIBUTION TO GDP GROWTH)

14% 22% 12%

Hundreds
Hundreds
12% 18%
10% 14% 9%
8% 10%
6%
6% 6%
4% 2% 3%
2% -2%
0% -6% 0%
-2% -10%
-3%
-4% -14%
-6% BBVA-GB Cons Growth (Monthly) -18% BBVA-GB Inv. Growth (Monthly) -6% BBVA-GB Net Exp Contribution (Monthly)
-8% Cons. Growth -22% Inv. Growth Net Exp. Contribution
Cons. Growth nowcast < Inv. Growth Nowcast
-10% -26% -9% Net Exp. Contribution Nowcast

Jun-16

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20
Sep-16

Sep-17

Sep-18

Sep-19
Mar-17

Mar-18

Mar-19

Mar-20
Jun-16

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20
Sep-16

Sep-17

Sep-18

Sep-19
Mar-17

Mar-18

Mar-19

Mar-20

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20
Sep-16
Dec-16

Sep-17
Dec-17

Sep-18
Dec-18

Sep-19
Dec-19
Mar-17

Mar-18

Mar-19

Mar-20
Strong Recovery in Private Recovery in Investment Net Exports falls on higher
Consumption also catching up Domestic Demand
* Includes Garanti BBVA BigData Retail Trade Index * Includes Garanti BBVA BigData Investment Index

Source: TURKSTAT, CBRT, BRSA, BBVA Research

 Turkey Economic Outlook 1Q20 14

Still high consumption according to our BigData retail

sales indicators. Economic confidence is also supportive
TURKEY: GARANTI BBVA BIGDATA INDICES TURKEY: CONFIDENCE INDICES
AND HIGH FREQUENCY INDICATORS (YEARLY CHANGES)
(%YOY, 3M MOVING AVG)

21% 20 30
18%
15 20
15%
12% 10
10
9% 5
6% 0
0
3% -10
0% -5
-3% -20
-10
-6%
-15 -30
-9%

Feb-20
Apr-18

Apr-19

Apr-20
Feb-18

Oct-18

Feb-19

Oct-19
Dec-17

Aug-18

Dec-18

Aug-19

Dec-19
Jun-18

Jun-19

Jun-20
-20 -40

Apr-18
Apr-17
Jul-17

Jul-18

Apr-19
Jul-19

Apr-20
Oct-17

Oct-18

Oct-19
Jan-18
Jan-17

Jan-19

Jan-20
Industrial Production
BBVA Big Data Retail Sales Index Purchasing Manager Index Consumer Confidence
BBVA Big Data Retail Sales Cash Intensity Adjusted Construction Confidence (Right) Service Confidence

Source: BBVA Research Turkey

 Turkey Economic Outlook 1Q20 15

Machinery Investment is already joining the cyclical upswing while

Construction Investment will reinforce the cycle from 2Q onwards
TURKEY: GARANTI BBVA BIGDATA INDICES AND HIGH FREQUENCY INDICATORS
(%YOY, 3M MOVING AVG)

MACHINERY CONSTRUCTION INVESTMENT: CONSTRUCTION INVESTMENT:

INVESTMENT DWELLINGS OTHER
25% 10 40% 60% 100%
20% 30% 80%
40%
15% 5
20% 60%
10%
20%
5% 0 10% 40%
0% 0% 0% 20%
-5% -5 -10% 0%
-10% -20%
-20% -20%
-15% -10
-40%
-20% -30% -40%
-25% -15 -40% -60% -60%
Jun-17
Sep-17
Dec-17

Jun-18
Sep-18
Dec-18

Jun-19
Sep-19
Dec-19

Jun-20
Mar-18

Mar-19

Mar-20

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20
Oct-16

Oct-17

Oct-18

Oct-19

Oct-16

Oct-17

Oct-18

Oct-19
Feb-17

Feb-18

Feb-19

Feb-20

Feb-17

Feb-18

Feb-19

Feb-20
Garanti BBVA BigData Construction Index Garanti BBVA BigData Public Construction Index
Garanti BBVA Big Data Machinery Investment Employment in Construction Employment in Construction
Industrial Production Machinery Non-Metalic Mineral (Cement) Non-Metalic Mineral (Cement)
Capacity Utilization Rate Investment Goods - yoy, rhs Turnover Building - rhs Turnover Civil Engineering -rhs

Source: TURKSTAT, BBVA Research Turkey

 Turkey Economic Outlook 1Q20 16

The economic recovery is passing-thru to the labor market

and unemployment rate will continue to correct
TURKEY: UNEMPLOYMENT RATE & BBVA NOWCAST TURKEY: EMPLOYMENT GROWTH BY SECTOR
(SA, % & GARANTI BBVA DATA-GOOGLE SEARCHES NOWCAST) (3MA YOY)

15.0 8% 15%
6% 10%
14.0
4% 5%

13.0 2% 0%
0% -5%
12.0
-2% -10%
-4% -15%
11.0
-6% -20%
10.0 -8% -25%
-10% -30%
9.0

Feb-18

Apr-20
Feb-16
Apr-16

Feb-17
Apr-17

Apr-18

Feb-19
Apr-19

Feb-20
Oct-16

Oct-17

Oct-18

Oct-19
Dec-15

Dec-16

Dec-17

Dec-18

Dec-19
Jun-16
Aug-16

Jun-17
Aug-17

Jun-18
Aug-18

Jun-19
Aug-19

Jun-20
Jun-17

Jun-18

Jun-19
Dec-16
Feb-17

Dec-17
Feb-18

Dec-18
Feb-19

Dec-19
Aug-17

Aug-18

Aug-19
Apr-17

Oct-17

Apr-18

Oct-18

Apr-19

Oct-19

Unemployment Rate (SA, %) Nowcast Industry Service Total Construction (rhs)

Source: BBVA Research Turkey Unemployment Google Model

 Turkey Economic Outlook 1Q20 17

Changing composition in credit growth: Private banks replace

Public banks, while Consumer credits take the lead
CREDIT GROWTH (FX ADJ) PRIVATE VS PUBLIC COMMERCIAL VS CONSUMER
(YOY, 13-WEEK ANNUALIZED TREND) (13-WEEK ANNUALIZED TREND) (13-WEEK ANNUALIZED TREND )

30% 45% 50%

20.4% 44%
25% 13w
ann.
35% 40%
20%
25% 23.0% 30%
15% 20.4%
13.3%
15% 17.5% 20%
10% yoy
14%
5% 5% 10%
0% -5% 0%
-5%
-15% -10%
-10%
-25% -20%
-15%

Mar-20
Mar-19

Apr-19

Apr-20
Oct-18

Feb-19

Oct-19

Feb-20
Sep-18
Dec-18

Sep-19
Dec-19
Jun-18

Jun-19

Jun-20

Jun-18
Aug-18

Dec-18

Jun-19
Aug-19

Dec-19

Jun-20
-20%
Apr-19

Apr-20
Oct-18

Feb-19

Oct-19

Feb-20
Dec-18

Aug-19
Jun-18
Aug-18

Jun-19

Dec-19

Jun-20

Public banks Private banks Commercial Loans (FX adjusted)

Sector Total Consumer Loans (excl. personal credit cards)

Source: CBRT, BBVA Research Turkey

 Turkey Economic Outlook 1Q20 18

Demand factors playing a bigger role in commercial loans…

specially for investment & working capital reasons
CREDIT CONDITIONS: COMMERCIAL FINANCING NEEDS OF THE REAL SECTOR FOR
(NET BALANCE) DIFFERENT PURPOSES
(POSITIVE= INCREASE IN DEMAND, NEGATIVE=DECREASE
80.0 IN DEMAND)
60.0
80
40.0
60
20.0 40
.0 20
-20.0 0
-40.0 -20
-40
-60.0
-60
-80.0
-80
-100.0 -100
2012-Q2
2007-Q4
2008-Q3
2009-Q2
2010-Q1
2010-Q4
2011-Q3

2013-Q1
2013-Q4
2014-Q3
2015-Q2
2016-Q1
2016-Q4
2017-Q3
2018-Q2
2019-Q1
2019-Q4

2016Q2
2016Q4
2017Q2
2017Q4

2018Q4
2019Q2
2019Q4

2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
2019Q1
2019Q3

2016Q2
2016Q4
2017Q2
2017Q4

2019Q2
2019Q4

2016Q3
2017Q1
2017Q3
2018Q1
2018Q3
2019Q1
2019Q3
20182Q

20182Q
20184Q
Fixed Investment Mergers/Acquisitions Inventories and Debt Restructuring
and Corporate Working Capital
supply demand Restructuring

Source: CBRT Bank Lending Survey 4Q19

 Turkey Economic Outlook 1Q20 19

Inflation will remain near at two digits during the first half
of the year to moderate after the summer
TURKEY: CPI AND CORE INFLATION PROJECTIONS TURKEY: INFLATION SUB-COMPONENTS
(YOY) (YOY)

26% 35%
24%
30%
22%
20% 25%
18%
16% 20%
14% 15%
12%
10% 10%
8%
5%
6%
4% 0%
Mar-17

Mar-18

Mar-19

Mar-20
Jun-18
Jun-16
Sep-16
Dec-16

Jun-17
Sep-17
Dec-17

Sep-18
Dec-18

Jun-19
Sep-19
Dec-19

Jun-20

Apr-16
Jul-16

Apr-17
Jul-17

Apr-18
Jul-18

Apr-19
Jul-19
Oct-19
Oct-16

Oct-17

Oct-18
Jan-17
Jan-16

Jan-18

Jan-19

Jan-20
Core CPI Core Food Energy

Source: CBRT, TURKSTAT, BBVA Research Turkey

 Turkey Economic Outlook 1Q20 20

The room for high interest rate cuts is becoming more limited as
domestic demand recovers rapidly and real rates are more closer to zero
TURKEY:OFFICIAL INTEREST RATES TURKEY: TAYLOR RULE BASED POLICY
(%) RATE ESTIMATES
(BBVA-GB SOE MODEL %)
29
27 26.0
25 24.0
23
22.0
21
19 20.0
17 18.0
15
16.0
13
14.0
11
9 12.0
7 10.0
May-16

May-17

May-18

May-19
Mar-16

Jul-16

Mar-17

Jul-17

Mar-18

Jul-18

Mar-19

Jul-19
Nov-16

Nov-17

Nov-18

Nov-19
Jan-16

Sep-16

Jan-17

Sep-17

Jan-18

Sep-18

Jan-19

Sep-19

Jan-20
8.0

Jun-18
Jul-18

Jan-19

Jun-19
Jul-19

Jan-20

Jun-20
Jul-20
Mar-18

Mar-19

Mar-20
Feb-18

Nov-18
Dec-18
Feb-19

Nov-19
Dec-19
Feb-20

Nov-20
Dec-20
Aug-18
Sep-18

Aug-19
Sep-19

Aug-20
Sep-20
Apr-18
May-18

Oct-18

Apr-19
May-19

Oct-19

Apr-20
May-20

Oct-20
CBRT One-Week Repo CBRT LLW CBRT Funding Cost

Source: CBRT, BBVA Research Turkey

 Turkey Economic Outlook 1Q20 21

We expect fiscal policy to become neutral with some risks of fiscal

slippage (above 3% GDP deficit) if the growth targets are missed
TURKEY: BUDGET BALANCE EVOLUTION PUBLIC REVENUES
(% OF GDP) (12M CUMULATIVE % YOY)

0 30%

20%
-0.5
10%

-1 0%

Jul-18

Jul-19

Jul-20
Jan-18

Jan-19

Jan-20
Sep-18
Nov-18

Sep-19
Nov-19

Sep-20
Nov-20
Mar-18

Mar-19

Mar-20
2012
2014
2016
2018

May-18

May-19

May-20
-1.5
Tax Revenues Non-Tax Revenues Revenues (yoy)
-2
PUBLIC EXPENDITURES
(12M CUMULATIVE % YOY)
-2.5
30%
-3
-2.89 20%

-3.5 10%
2014
2016
2018

Apr-18

Apr-19

Apr-20
Feb-18

Oct-18

Feb-19

Oct-19

Feb-20

Oct-20
Jun-18
Aug-18

Dec-18

Jun-19
Aug-19

Dec-19

Jun-20
Aug-20

Dec-20 0%

Jul-18

Jul-19

Jul-20
Jan-18

Nov-18
Jan-19

Nov-19
Jan-20

Nov-20
Sep-18

Sep-19

Sep-20
2012
2014
2016
2018

Mar-18
May-18

Mar-19
May-19

Mar-20
May-20
Non-Interest Expend. Interest Payments Expenditures (yoy)
 Turkey Economic Outlook 1Q20 22

The recovery of domestic demand will revert the Current Account

Balance but at a slower pace given the de-leveraging process
TURKEY: CA BALANCE DECOMPOSITION TURKEY: CAPITAL FLOWS
(% GDP AND CREDIT YOY INVERTED AND FORWARDED 4 MONTH) (% GDP)

2% -10% 10%
1%
0% 8%
0%
-1% 6%
-2%
-3% 10% 4%
-4%
-5% 20% 2%
-6%
0%
-7%
-8% 30%
-2%
-9%
-10% 40% -4%

Apr-20
Oct-19

Feb-20

Oct-20
Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Aug-20

Dec-20
Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19

Jun-20
Jun-20
Jun-11

Jun-12

Jun-13

Jun-14

Jun-15

Jun-16

Jun-17

Jun-18

Jun-19
Dec-10

Dec-11

Dec-12

Dec-13

Dec-14

Dec-15

Dec-16

Dec-17

Dec-18

Dec-19

Dec-20

Current Account Deficit (%GDP) Left Net FDI Net Other Investment
Structural Current Account Deficit (% GDP) Left Net Portfolio Flows Reserves
FX Adj Credit Growth(yoy, inverted and forwarded 4M)- Right Net Error and Omissions

Source: CBRT and IMF

03
Turkey:
Economic Forecasts
 Turkey Economic Outlook 1Q20 24

We upgrade our 2020 GDP growth estimate to 4% with a higher

support from Domestic Demand. A more gradual disinflation in 2020
GDP FORECAST CONSUMER INFLATION FORECAST
(YOY) (YOY)

10% 20%
8% 18%
6% 16%
4% 14%
2% 12%
0% 10%
-2% 8%
-4% 6%
-6% 4%
May-18

May-19

May-20
Mar-20
Mar-18

Jul-18

Mar-19

Jul-19

Jul-20
Nov-18

Nov-19

Nov-20
Jan-18

Sep-18

Jan-19

Sep-19

Jan-20

Sep-20

May-19
Mar-19

Jul-19

Mar-20

May-20

Jul-20
Sep-19

Nov-19

Sep-20

Nov-20
Jan-19

Jan-20
The business cycle upswing will be sustainable Still negative (although closing) output gap,
during the first half of the year on still high base relatively mild cost push factors and more favorable
effects and policy impulses. Robust consumption administrative prices will continue to support a
and accelerating investment will be buffered by gradual disinflation process. One digit inflation will
declining net external demand. be achieved at the end of the year.

Source: BBVA Research

 Turkey Economic Outlook 1Q20 25

The room for further interest rates cuts is now narrower.

We maintain some prudence in our exchange rate forecasts
MONETARY POLICY RATE FORECASTS EXCHANGE RATE FORECASTS
(% CBRT FUNDING COST) (USDTRY LEVEL)

26% 7.4
22% 7
18% 6.6
14% 6.2
10% 5.8
6% 5.4
2% 5
Mar-19

May-19

Jul-19

Mar-20

May-20

Jul-20
Jan-19

Jan-20
Sep-19

Nov-19

Sep-20

Nov-20

Jul-19

Jul-20
May-19

May-20
Mar-19

Mar-20
Sep-19

Nov-19

Sep-20

Nov-20
Jan-19

Jan-20
The Central Bank will maintain some growth bias Economic recovery, still supportive current account
leading to Ex-ante real rates slightly positive at the balance and low global interest rates support the
end of the year. Domestic demand pressures could currency. However, loose policies and geopolitical
be higher than expected and should be monitored risks could trigger some volatility. We maintain a
to change the curse of Monetary Policy if needed prudence forecast for the exchange rate
 Turkey Economic Outlook 1Q20 26

Turkey Baseline Scenario

2018 2019 (e) 2020 (f) 2021 (f)

GDP (%) 2.8 0.8 4.0 4.5

Private consumption (%) 0 0.9 5.2 4.3

Public consumption (%) 6.6 5.3 3.5 3.5

Investment in fixed capital (%) -0.6 -12.4 3.4 5.9

Exports (%) 7.8 6.5 4.6 4.6

Imports (%) -7.8 -8.2 8.2 6.2

Unemployment rate (average) 11.0 13.7 11.8 10.3

Inflation (end of period, YoY %) 20.3 11.8 8.5 8.0

CBRT funding rate (end of period, YoY %) 24.0 11.25 9.0 8.5

Exchange rate (USDTRY, end of period) 5.28 5.94 6.40 6.80

Current account balance (% of GDP) -3.6 0.1 -1.0 -2.6

Central government budget balance (% of GDP) -1.9 -2.9 -3.0 -2.9

(f) Forecast. (e) Estimated.
Source: BBVA Research Turkey
 Turkey Economic Outlook 1Q20 27

This report has been produced by:

Chief Economist
Álvaro Ortiz
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Turkey
Economic Outlook
First quarter 2020

February 2020