Turkey's Q1 GDP will most likely reveal further weakness

Turkey will release Q1 GDP on 10 June. According to Standard Chartered, y/y growth is expected to slow further to 1.4%, from 2.6% the previous quarter. Turkey grew at 2.9% y/y in 2014, a significant slowdown from the 4.2% y/y achieved in 2013, notes Standard Chartered. Domestic consumption has weakened over recent quarters as declining consumer confidence (currently at a five-year low) tends to correlate with a weakening Turkish lira, while net exports'  contribution to GDP has faltered.

Sunday's election outcome and the strongly negative market reaction, plus the resulting uncertainty, might force the Turkish central bank to repeat its January 2014 action and increase the policy rate steeply; this could even tip the country's growth into contractionary territory.