Chart of the week

Turkey’s Economic Confidence Index, which encapsulates both producers’ and consumers’ sentiment and is generally positively correlated with growth, continued to improve in March, following steep falls in summer 2018 prompted by a collapse in the lira. At 81.9, however, the index remains well below its long-term average of 100.

OUR ANALYSIS

Although it is too early to say that Turkey’s economy is out of recession, it does seem to be over the worst. In addition, weaker demand levels have reduced the current account deficit and with inflation starting to ease, the central bank should soon be in a position to loosen monetary policy to stimulate growth. That said, the process could be delayed if renewed volatility in the lira continues, reflective as it is of fragile investor confidence, and the cloud of uncertainty surrounding government policy and the local elections (March 31st) only complicates matters.

The opinion expressed above is dated March 29th, 2019, and liable to change.

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