Turkey saw release of first quarter of GDP and April current-account deficit on Friday last week. Despite the positive news contained in the data, Lira (currency of Turkey) was left unimpressed as the general mood of risk took over.
Data released by the Turkish Statistical Institute (TurkStat) on Friday showed that Turkey's GDP growth for the first quarter exceeds forecasts. It came in at 4.8 percent, exceeding the consensus analyst estimates of 4.4. Data followed a 5.7 percent increase in the fourth quarter of last year.
On the current-account side, the April current-account deficit surprised positively, narrowing to $3 billion in comparison to $3.7 billion in March. The balance excluding gold and energy has not improved in the past year - the entire headline improvement was driven by the falling energy prices. While a narrower current-account gap in nominal USD terms is helpful for the BoP, falling prices do not boost real GDP (except indirectly).
Manufacturing data were strong for the early part of the quarter but weaker in March; the weakness intensified in April. The PMI has remained below 50. Confidence in the political system was stable at the beginning of the year but began to slip beginning March as the struggle between the then prime minister and the president came out in the media, resulting in speculation about early election again.
“Irrespective of the Q1 data, activity is likely to be dampened by the political uncertainty in the quarters to come. We forecast 3.5 percent GDP growth for the full year,” said Commerzbank in a report.
TRY edged lower on Friday against the greenback. USD/TRY closed 1.10 pct higher at 0.9230 on Friday and at the time of writing trading at 2.9222. “We see USD-TRY at 3.00 over the coming quarter as the government makes a strong move to change the constitution,” adds Commerzbank.
