Coal for votes – or maybe even lives?

Today is the last day of the quarterly data-intensive week. In addition to the first quarter GDP figures, which were released on June 10, industrial production and Balance of Payments for April came out on June 9 and 12 respectively.

Turkey grew 4.3 percent annually, as the economy shifted from domestic to external demand as the key driver of growth. Given the country’s large current account deficit and dependency on capital flows for growth, this is certainly a positive development.

Some analysts questioned this adjustment, claiming it was mainly due to gold trade, thanks to Reza Zarrab and former Economy Minister Zafer Çağlayan who “made it happen”: Turkey was a net exporter of gold ($1.6 billion) in the first quarter, versus a net importer ($ 1.3 billion) in the first quarter of 2013.

However, there is a good chance that a significant part of the 1.2 percentage points shaved off growth because of the stock depletion is due to gold, and so it is safe to say there is a rebalancing nonetheless.

You can also see, by looking at the sources of growth in more detail, that private investment plunged, shaving 0.3 percentage points off growth. Public spending and investment continued to contribute to growth, but at 1 percentage point, their contribution was less than in the previous quarter (1.5 percentage points).

All in all, political uncertainty and exchange rate volatility took their toll on growth, as consumption and investment plunged. However, the country still managed to grow respectably thanks to exports to (mainly) Europe and government spending.

The April data shows this trend continued into the second quarter: The current account deficit decreased on an annual...