Turkey's final economic growth figures for Q2 15 surprised positively as GDP expanded 3.8% y/y versus 2.6% y/y (revised) a quarter earlier. Domestic demand continued to be a strong driver while foreign demand and inventories were still decreasing.
However, consumer lending growth is slowing, signalling a cooling down in consumer confidence. As Turkey is holding the second parliamentary elections this year and the country has been militarily active on its borders, business sentiment remains fragile, limiting private investments.
"Thus, the economy is expected to grow 2.8% y/y in 2015 while seeing considerable downside risks to this growth forecast, as political uncertainty and global EM vulnerability to China's woes and the Fed's upcoming tightening may restrain investment activity further", says Danske Bank.
The future Turkish government will have to deal with many internal economic problems which require structural reforms. Turkey's unemployment rate continues to stay around 10%, seeing an upward trend since 2012 and being very dependent on seasonal factors.
The current economic activity has not been enough to change the trend, and weakened business sentiment is weighing further on the labour market.
