WOOD Flash – Turkey macro: high 3Q GDP growth and good 4Q sentiment data put Turkey on track for real GDP growth

Turkstat has released the preliminary 3Q GDP growth data for Turkey, showing significant 6.7% growth in 3Q, above the 4.8% (mean: 4.6%; high 6.8%; low -0.4%) that the consensus expected. As we have updated our models, we signal that our GDP model suggests zero growth for this year and, in our alternative model, which includes the sentiment data for October and November, positive growth of 0.7% – a significant achievement in a year of pandemic. Consequently, we upgrade our 2020E GDP growth forecast to 0-0.5%. On the other hand, this growth was achieved through domestic consumption, unlocked by expansionary macroeconomic policies, which, in the Turkish case, led to a widening of the current account deficit, very high volatility in the Lira, and a significant loss in the FX reserves – which included an increase of the forward leg of the reserves to above USD 55 bn.