Turkey’s official gross domestic product (GDP) expanded by 4.5% y/y in 2023 versus 5.5% y/y in 2022, the Turkish Statistical Institute (TUIK, or TurkStat), said on February 29.

TUIK also released a 4% y/y official growth figure for 4Q23, while it revised the 3Q23 figure to 6.1% from 5.9%. A 1% q/q official growth rate was provided for 4Q23 versus 0.3% q/q for 3Q23.

It is not advisable to plan, price or draw inferences based on TUIK data. There is widespread concern about the reliability of Turkey’s official data series. 

Turkey led the global inflationary period in the post-covid monetary expansion era. Currently, it is leading the stagflation, or "slumpflation", period.

On August 31, when Turkey released its official GDP data for 2Q23, the country's finance minister Mehmet Simsek, appointed two months previously following the national elections, wrote in a tweet that TUIK would post an official growth rate of higher than 4% for 2023.

On September 6, in the government's new medium-term economic programme (OVP), he pencilled in a 2023 growth target of 4.4%.

On August 31, bne IntelliNews noted: “If Simsek could declare 'I created a recession', that would be the best thing in terms of marketing Turkey to the global finance industry. But Turkey’s president, Recep Tayyip Erdogan, would then very likely administer a slap to his shiny pate.

“All-in-all, it seems that Simsek is planning to find middle ground at above 4% growth.”

Turkey will hold important local elections at the end of March.

On November 30, when TUIK released its Q3 figure, bne Intellinews noted: “If TUIK releases 5% y/y (2.4% q/q) official growth for 4Q23, annual 2023 growth will come in at 4.8%. A 4% y/y (1.4% q/q) release for the fourth quarter will result in 2023 growth of 4.5%, while 3% y/y (0.4% q/q) will deliver 4.2%.

“So, it can be concluded that TUIK will release an official growth rate for 4Q23 of around 4% y/y, with the upper boundary drawn at 5% and the lower boundary at 3%.”

For 2024, Simsek, in the OVP, has inserted 4% for expected official GDP growth. As things stand, the middle ground policy will remain in effect.

For Simsek’s purposes, in the absence of a technical recession (negative official GDP growth figures in two consecutive quarters on a q/q basis), Bloomberg’s headline on the 3Q23 data is helpful: “Turkish Economy Is Skirting Recession Even as Rates Shoot Up”.

So, even if Simsek is not able to deliver a technical recession in the battle against inflation and quest for positive real interest rates, he can nevertheless market the sexy idea that he is at least skirting a recession.

Screenshot: Tweet from Simsek.

“One third of the growth in 2023 came from investments in machinery and equipment, which increase our productive capacity,” Simsek wrote in a tweet, commenting on the official GDP data release.

“In line with our program, the rebalancing in growth that started in the third quarter of the year continued in the last quarter,” he added.

Indicators for 2024 show that the rebalancing in the economy and the improvement in the current account deficit are continuing, according to Simsek.

Simsek, who has been circumnavigating the globe like some kind of Turkish "Magellan" of our age, is, right now, in Sao Paulo, attending a summit of G20 finance ministers.

Screenshot: US Secretary of the Treasury Janet Yellen posing with Simsek in Brazil.

So far, Simsek’s expeditions have not netted much cash. The pressure on him to do so will rise following the local polls to be held on March 31. After they are over and done with, he will have no more excuses.

He can spend all the time he likes addressing the finance industry media with nonsensical marketing campaigns, but a policy rate that stands above the current official inflation rate would be of rather more help.

The problem is that the Erdogan regime has already accepted that official annual inflation will rise in May and peak at 70-75%. The policy rate stands at just 45% despite hikes totalling 3,650 bp brought in from June to January.

The delivery of a positive real rate will thus only occur in 2H24.

The finance industry would be okay with an official end-2024 inflation release of 40-50%.  A 50-55% policy rate could be marketed as standing above expectations.

At the end of the day, Turkey is seeking hot money inflows once again. It has been doing so since 1950. From 1980 (and particularly from 2018), it has grown weaker and weaker at the knees as the cycles have become shorter and shorter across time.

During the current "investor friendly" phase, the finance industry will make some money, while Turks will collect a new set of bruises as they spin in what is by now a very vicious rotation.