WOOD Flash – Turkey macro: 2Q GDP posts strong print

The flash estimate of the 2Q GDP reveals that the economy expanded by 7.6% yoy, close to the 7.5% yoy reported in 1Q. This result is consistent with the positive message delivered by the monthly indicators recently, but the composition of GDP is somewhat surprising, as it shows little evidence of any real distortion from the run-away inflation, as household spending, investment and net exports all, positively and sizably, contributed to the GDP growth. In current prices, GDP increased by 114% yoy. The sentiment indices for the first two months of 3Q signal little meaningful slowdown, as yet. We expect real GDP to expand by 4.5% this year, slowing as a result of the Eurozone and US downturns, and by 3% next year, if energy supply disruptions prove to be contained. We expect the policy rate to drop to 10%, given the dovish stance of the CBT, which implies that the real policy rate will be c.-70%.