Although the leading indicators have already taken the picture of 3Q20, the GDP growth within the important macro data flow of the next week will be monitored in terms of projections to be formed for the whole year. Turkey's economy, showed 9.9% contraction in 2Q20 on an annual basis together with the impact of the pandemic. In the 3Q20 period, both the effects of reopening in the economy and the loan growth supported by the loose financial conditions were effective in showing a rapid recovery.
The easing of restrictive measures and the normalization process initiated in the economy since the end of 2Q20 had a positive impact on the economic activity and a rapid recovery was seen in the data showing business activity. Leading indicators such as industrial production, PMI and sectoral confidence indices showed that this effect continued throughout the 3Q20 period. If we look at the industrial production which shows the closest correlation with the growth series; In the light of the recently announced September data, it is seen that there is an increase of 7.7% compared to the same period of the previous year. Industrial production increased by 30.3% compared to the previous quarter.
Loosened financial conditions and the acceleration of bank loan growth by regulators during 3Q20 also had an impact on the leg of credit growth, which will support growth and we have experienced a lot of side effects. The fact that credit growth had a greater impact on the demand side than on investments also had an increasing effect on the current account deficit by accelerating imports. However, as the most important side effect felt; TRY depreciated, price stability deteriorated and inflation was fueled. Currently, this effect is tried to be reduced with the traditional and tightening policies implemented and priority is given to price stability.
In the light of all this; as well as expecting a strong double-digit QoQ growth for 3Ç20 period, if compared to the same quarter of last year, we expect 3.5% growth rate for Turkey's economy. With the concern that the increase in Covid-19 infections and possible restriction measures will create downside risks on economic activity, we anticipate that the demand effect will diminish in 4Q20 with the tightening in financial conditions. Therefore, 4Q20 will point to a slower growth picture. We foresee 0% growth for the whole year and we think there may be a slight deviation range above or below this.,
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