ANKARA: Economic confidence in Turkey is at its highest since the end of 2015, underscoring the economy’s quietly growing resilience following a series of political and security shocks over the last year. A measure of business and household sentiment compiled by the country’s stats office gained 1.1 points to 100.5 in May from 99.5 points in April –its best level since November 2015–and the fifth consecutive month of climbs, Anadolu Agency reported.
Turkey’s economy has managed to rebound strongly after a third quarter contraction which marked its worst since the financial crisis. GDP growth has since recovered to gain 3.5% in the last three months of the year. May’s jump in sentiment was driven by rises in consumer services, retail and construction, according to Turkish Statistical Institute, Turkstat. Retail trade confidence and construction confidence increased by 1.1% (102.8 points) and 0.8% (86.3 points) month-on-month, respectively. However, the real sector confidence slipped by 1.4% to 104.8 points in the same period. As Turkey’s inflation rate surges to levels not seen since the 2008 financial crisis, it will be up to the central bank not only to control rising prices, but to break free from political interference.
Turkey’s inflation peaked last month at 11.87 % year-on-year in April from 11.29% in March, data from Turkstat showed, which represent the highest increase in consumer prices in nearly a decade. The increase was more dramatic in certain categories and lower in others. In food and housing, which account for 24% and 15% of the consumer basket, respectively, the increase stood at 8.7% and 7.4% respectively. Transport and tobacco categories, which make up 14% and about 6% of household budgets, respectively, went up 18% and nearly 22%. The rise in individual goods in the producer basket is even more noticeable. In the textile category, which accounts for about 9% of the basket, year-on-year price increases were close to 18%. For iron, steel and other metals, it stood at a whopping 44%. “There are several factors behind the very recent spike in food inflation, including the fall in the lira earlier in the year, bad weather which pushed up food inflation, and a rise in petrol inflation. We think these factors should all unwind in the coming months, bringing inflation down from double-digit rates,” William Jackson, Senior Emerging Markets Economist at Capital Economics explained.
