Prof. Dr. Kamil Yılmaz: Second Quarter Growth is Weak, September Rate Cut Would Be a Sign of Early Election
Evaluating the Turkish economy's 2.3% growth figure in the second quarter, Prof. Dr. Kamil Yılmaz stated that the year could be the slowest growth period since 2020 and emphasized that a potential rate cut in September would be a harbinger of an early election.
Analyzing the 2.3% growth figure recorded by the Turkish economy in the second quarter, Prof. Dr. Kamil Yılmaz pointed out that the sub-components of growth are weak. Stating that growth would remain much lower if the agricultural sector were excluded, Yılmaz predicted that the year could mark the slowest growth period since 2020.
Analysis of Second Quarter Growth Data
Evaluating the 2.3% annual growth figure recorded by the Turkish economy in the second quarter, Prof. Dr. Kamil Yılmaz stated that the sub-components of growth were quite weak.
Pointing out that the agricultural sector grew by 13.3% annually and contributed approximately 1 point to quarterly growth, Yılmaz noted that without agriculture, growth would have remained around 1.5%.
Sectoral Developments and Domestic Demand Pressure
Stating that the services sector slowed down significantly, growing at a very low rate of 0.5%, Prof. Dr. Yılmaz noted that the construction sector also contracted with the completion of works in the earthquake zone.
Expressing that the 40% interest rate suppressing domestic demand is clearly visible in the services sector, the expert noted that net exports made a positive contribution to growth as imports contracted faster than exports.
The Slowest Growth Year Since 2020
Stating that the announced data remained below expectations and that first-half growth was completed around 2.5%, Prof. Dr. Yılmaz emphasized that it would be quite difficult to achieve a 3% growth rate for the whole year.
Stating that there was a 1.8% drop in public consumption and a weak increase of 0.6% in capital investments, Yılmaz predicted that this year would be the slowest growth year since 2020.
Interest Rate Expectations and Credit Packages
Stating that some steps toward expansion could be taken as of September along with the Medium-Term Program, Prof. Dr. Kamil Yılmaz noted that he does not expect the Central Bank to enter a very rapid rate-cutting process.
Reporting that his year-end interest rate forecast is 35%, Yılmaz stated that the economic administration will try to pull growth upward by offering subsidized loans through public banks.
September Rate Cut and Early Election Possibility
He argued that if a rate cut is made in September after the weighted funding rate is pulled down to 37%, this would happen with a political demand rather than a technical decision.
Stating that if a rate cut comes in September, he would evaluate this as a strong indication in terms of preparation for an election, Yılmaz expressed that November of next year could be written down as a clear election date.
Inflation Forecasts and Future Expectations
Touching upon inflation expectations as well, Prof. Dr. Yılmaz stated that an inflation rate in the range of 29-30% is normal for this year.
He noted that the CBRT needs to follow a tighter policy to reduce inflation below 25% next year, but this would be difficult in a potential election year.