It’s the credit, stupid!


Turkey’s new GDP series, released last December, has become a constant source of contention, debate and even agony amongst the analyst community.  The latest comments coming from Commerzbank — upon the publication of Q2 data — are one particularly interesting and recent example…

It is true that the new numbers will take a while to digest and feel comfortable with. But are 5%-ish growth rates really that astonishing or incredulous for Turkey? Perhaps not.  One way to see this is to think about the Turkish economy a bit like the Chinese economy — throw more stimulus and especially, “debt” at it, it kind of grows at rates that are hard to fathom elsewhere, particularly in advanced economies.

Here is a chart that kind of makes this point, which follows up from an earlier post here.  Of course, this is just a correlation, but it suggests that once we get the “credit impulse” going, the rest follows.

Looking forward, we’ve got a bit of a problem because sustaining the credit impulse won’t be easy, as we can tell from the sharply slowing credit growth in the aftermath of the expiration of the “credit guarantee scheme” (see second chart).

So what “rabbits” will be pulled out of the hat to sustain growth till November 2019 elections will be interesting to watch — an issue that is, arguably, as interesting and as pertinent as the quality of the statistics…