Turkey: Economic confidence increaes in Januar

Turkey’s economic confidence index rose to 96.2 in January. Increase in index; stemmed from increases in consumer and service sector confidence indices.

Turkey’s economic confidence index rose to 96.2 in January. Increase in index; stemmed from increases in consumer and service sector confidence indices. While the consumer confidence index increased to 83.3 in January, the service sector confidence index reached 101.9. Real sector confidence index decreased to 109, retail trade confidence index to 108.5 and construction sector confidence index to 84.2. The interim revision made by the sectoral sub-confidence indices caused the economic confidence index data to be revised.

 

The Covid-19 outbreak still causes uncertainties on the economy. Therefore, some signs of slowdown were observed in some sectoral indices, especially the real sector confidence index in January. Therefore, some increases should be approached with caution. In January, the sub-breakdowns that positively affected the economic confidence index were consumer confidence and service sector confidence index. In particular, restrictions stemming from the Covid-19 outbreak may also have a negative impact on these indices. The service sector is experiencing a significant contraction effect, especially with the loss of turnover and employment due to epidemic prohibitions.

 

While the retail trade sector also contracted in January, online sales have the ability to compensate for the contraction in store sales. At the same time, due to periodically existing prohibitions and restrictions, the overall weight of basic consumption has increased and there may be cumulative effects such as the demand that has been brought forward. However, curfews are not as tight as the previous closing period, which may limit the contraction effect in retail trade. On the construction side, although the cheaper housing loans are still considered as a relative advantage, the fact that financial conditions are getting more tight and the impact of Covid cases limit growth.

 

In terms of real sector confidence index; With the increase in interest rates, the 4Q20 growth indicators, which are expected to neutralize the effects of high loan growth in 3Q20, are expected to slow down slightly with the transition to 2021. Foreign demand conditions tend to decline, especially with the slowdown effects seen due to restrictions in the Euro Area. Although growth will be restricted in the first quarter due to both the epidemic and financial tightening, in a wider perspective, the impact of economic openings along with vaccination and the continuity of economic support will be decisive on the process.

 

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