The Turkish economy contracted by 3 percent year-on-year in the fourth quarter of 2018, compared to an upwardly revised 1.8 percent expansion in the previous three-month period and worse than market expectations of 2.7 percent contraction. This was the first contraction since the third quarter of 2016, as household consumption and fixed investment fell while government spending rose at a softer pace. On the positive note, net external demand contributed positively to the GDP due to a drop in imports prompted by falling lira.
On the expenditure side, household consumption tumbled 8.9 percent, after a 0.8 percent rise in Q3 and fixed investment slumped 12.9 percent, following a 4.7 percent fall in the previous period. In addition, government spending went up at a softer 0.5 percent (vs 3.4 percent in Q3). On the other hand, net external demand contributed positively to the GDP growth, as exports increased 10.6 percent (vs 13,6 percent in Q3) and imports tumbled 24.4 percent (vs -16.8 percent in Q3) due to a weak lira.
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On the production side, industrial production shrank by 6.4 percent (vs 0.1 percent in Q3) dragged by manufacturing (-7.4 percent vs 0.5 percent) and agriculture contracted by 0.5 percent, reversing a 1.8 percent increase in the previous period. Meantime, construction output shrank by 8.7 percent, following a 5.6 percent contraction in the third quarter. Also, services output contracted 0.3 percent (vs 4.8 percent in Q3), mainly due to financial and insurance activities (-16.2 percent vs 8.4 percent); professional, administrative and support service activities (-10.2 percent vs -7.3 percent), while both public administration, education, human health and social work activities (5.7 percent vs 11.4 percent) and information and communication (2.9 percent vs 3.4 percent) grew at a softer pace. In contrast, real estate expansion accelerated to 4.7 percent in the three months to December from 2.3 percent in the previous period.
For 2018 as a whole, the economy grew 2.6 percent, compared to a 7.4 percent expansion in 2017.
On a seasonally adjusted quarterly basis, the economy contracted by 2.4 percent in the fourth quarter, following an upwardly revised 1.6 percent contraction in the previous period.