Why Turkey's economy stumbled in 2016

According to the Turkish Statistical Institute (TUIK), Turkey grew by 3.5 percent in the fourth quarter of 2016. Added to upward revisions of the previous two quarters, that brings Turkey's annual growth in 2016 to 2.9 percent. The same number was 6.1 percent in 2015. 

What does this mean? Turkey recently changed the way it calculates its GDP, leaving all analysts perplexed.

 One of our basic indicators was reconfigured overnight and there is still much confusion. But this much is obvious: Turkish growth stumbled in 2016. We know that without even starting to look at how the GDP calculation changed. 

The government's medium-term program (MTP) was expecting 2016 growth to reach 4.5 percent at the outset, but that was revised down to 3.2 percent. So with 2.9 percent growth in 2016, does it mean that the MTP was successful in anticipating the growth rate in 2016? Definitely not. The MTP numbers are from Mars, while the newly announced 2.9 percent is from Venus. They are based on different calculations of GDP. If we still had the old series, 2016 growth could well be around 1 percent with this performance. That is why Turkey's growth is far below the country's own target.

Some have been asking this question, so I'll humor it: "Can we expect growth to rebound automatically with a 'Yes' vote in the April referendum on shifting Turkey to an executive presidential system?" No. Here's why.
Look at the reasons behind Turkey's poor performance in 2016. There are three main items here. First, the slowdown in global growth. The Turkish economy, at the end of the day, is part of the European economy.

 Half of our exports go to European markets, where things were slow in 2016 and remain so today. 2016 was the ninth consecutive year...

Continue reading on: