Download 4. S D

Central Bank of the Republic of Turkey
4. Supply and Demand Developments
The GDP data of the last quarter of 2013 suggest that economic activity remained largely
consistent with the outlook presented in the January Inflation Report. Seasonally adjusted data point to
an increase of 0.5 percent in the GDP on a quarterly basis. Thus, economic activity, which gained
momentum in the first half of the year, continued with a rather moderate course in the second half.
Having settled on a weak path in the preceding two quarters, final domestic demand recorded a
faster increase in the last quarter. As for the components of the final domestic demand, the private
sector demand continued with a mild course across 2013, while the public sector demand, which
registered a fluctuating course, proved to be the main driver of growth in the domestic demand.
Imports lagged behind exports on a quarterly basis in the last quarter and demand components, as
projected, displayed a balanced outlook compared to the first half of the year.
Data pertaining to the first quarter of 2014 point to a mild increase in economic activity. On the
production side, the industrial production index stood above the previous quarter’s average and
maintained a stable uptrend on a quarterly basis in the January-February period. On the expenditures
side, the private sector demand slowed due to the consumption of durable goods and private
machinery and equipment investments. On the other hand, the data on the consumption of nondurable goods and construction investments are still favorable. As for the second quarter, indicators of
BTS as well as credits and imports indicate that domestic demand will remain sluggish. Accordingly,
domestic demand is envisaged to follow a weak course in the first half of the year.
External demand indicators point to an uptick in the exports of goods and services, and a
decrease in the imports thereof. A similar situation applies to export and import indicators excluding
gold that reflects the underlying trend. Thus, it is projected that the balancing among demand
components will continue in the first quarter and the current account deficit will record a slight decline
on a quarterly basis.
In the first half of the year, domestic demand is envisioned to follow a sluggish course due to
domestic uncertainties and tightening in financial conditions, while net exports and the public sector
demand are expected to compensate for this course. In line with waning uncertainties, the private
sector demand is estimated to improve in the second half. Meanwhile, it should be noted that the
tightening in financial conditions owing to recent developments may impose downside risks on
domestic demand. Accordingly, domestic demand conditions are expected to support the disinflation
process and contribute to the recent improvement in the current account deficit.
4.1. Gross Domestic Product Developments and Domestic Demand
According to the national accounts data released by the TurkStat, the GDP posted a year-onyear increase by 4.4 percent in the last quarter of 2013. The final-quarter data led to a retrospective
revision of the national accounts data by subcategories (Box 4.1). Thus, following the growth of 2.1
percent in 2012, the GDP rose by 4.0 percent in 2013. Seasonally adjusted data suggest that the
economic activity continued to grow at a slower pace, while the growth of final domestic demand
gained slight momentum in the last quarter (Chart 4.1.1). This acceleration was attributed to the rising
Inflation Report 2014-II
31
Central Bank of the Republic of Turkey
public sector demand that followed a fluctuating course in 2013, while the private sector demand
remained mild (Chart 4.1.2).
Chart 4.1.2.
GDP and Final Domestic Demand
Public and Private Sector Demand
(Seasonally Adjusted, Billion TL, 1998 Prices)
(Seasonally Adjusted, 2011Q1=100)
GDP
Final Domestic Demand
32
32
30
30
28
26
Millions
Chart 4.1.1.
Private Sector Demand
Public Sector Demand
130
130
120
120
28
110
110
26
100
100
24
24
90
90
22
22
80
80
20
20
70
70
18
18
60
12341234123412341234123412341234123412341234
60
123412341234123412341234123412341234
20032004 20052006 20072008 20092010 20112012 2013
2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: TurkStat, CBRT.
The first-quarter data indicate that private demand decelerated. In the January-February
period, the production of consumption goods increased, while that of imports declined (Chart 4.1.3).
The effects of tight financial conditions, depreciated Turkish lira, weakened consumer confidence and
tax adjustments were mostly observed in the demand for automobiles and durable consumption
goods. In fact, the analysis of consumption good imports by subcategories points to a steep fall in
imports of automobiles, and a mild fall in those of durable and semi-durable goods; while imports of
non-durable goods remained on the increase (Chart 4.1.4). The production of consumption goods
followed a similar course in the January-February period such that the production of durable
consumption goods receded on a quarterly basis in contrast to the continued increase in the
production of non-durable goods. As for machinery and equipment investments, the production of
investment goods excluding transport vehicles remained almost flat, while the imports thereof recorded
a decline (Chart 4.1.5). On the construction front, data on investments indicate further increase in
construction investments (Chart 4.1.6). In sum, demand for durable consumption goods and machinery
and equipment investments decreased, while the uptrend in non-durable consumption goods and
construction investments continued.
Chart 4.1.3.
Chart 4.1.4.
Production and Import Quantity Indices of
Consumption Goods
Import Quantity Indices of Consumption Goods by
Subcategories
(Seasonally Adjusted, 2010=100)
(Seasonally Adjusted, 2010=100)
Production
Imports (right axis)
120
125
115
115
110
105
150
Passenger Cars
Semi-Durable Goods
Durable Goods
Non-Durable Goods
150
130
130
110
105
95
110
100
85
90
90
95
75
90
65
70
70
85
55
50
50
80
45
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
30
30
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
*As of February.
Source: TurkStat, CBRT.
32
Inflation Report 2014-II
Central Bank of the Republic of Turkey
Chart 4.1.5.
Chart 4.1.6.
Production and Import Quantity Indices of Capital
Goods Excluding Transport Vehicles
Production and Import Quantity Indices of NonMetallic Mineral Goods
(Seasonally Adjusted, 2010=100)
(Seasonally Adjusted, 2010=100)
Production
Imports
Production
Imports (right axis)
150
140
125
135
140
130
120
125
130
120
115
115
110
105
105
95
100
85
95
75
120
110
110
100
100
90
90
80
80
90
65
70
70
85
55
60
60
80
45
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
1234123412341234123412341234123412341*
2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
2005 2006 2007 2008 2009 2010 2011 2012 2013
2014
*As of February.
Source: TurkStat, CBRT.
BTS indicators suggest a sustained weak course in domestic demand in the second quarter. In
fact, expectations of domestic market orders for the manufacturing of consumption and investment
goods waned in the first quarter (Charts 4.1.7 and 4.1.8). On the other hand, the registered domestic
market orders for the manufacturing of consumption goods as well as the recent recovery in the
consumer confidence index suggest a possible mild rebound in the consumption demand in the
upcoming period. Meanwhile, expectations of investment and employment, which reflect the
relatively longer-term decisions of firms, exhibit a weak outlook (Chart 4.1.9). Accordingly, the sluggish
course of investments is expected to persist for a while. However, private machinery and equipment
investments, which is still 8.3 percent below the first-quarter reading in 2011, is not estimated to contract
noticeably across the year, given the consumption demand outlook besides the favorable
performance of exports. In sum, the lower uncertainty perception, the improved consumer confidence,
the slightly appreciated Turkish lira and the recovered consumption demand are estimated to support
the domestic demand for a gradual rebound starting from the second quarter (Chart 4.1.10). On the
other hand, it should be noted that downside risks on domestic demand are present due to tightened
financial conditions caused by recent developments.
Chart 4.1.7.
Chart 4.1.8.
Registered Domestic Orders and Expectation of
New Domestic Orders in the Manufacturing Sector
of Consumption Goods*
Registered Domestic Orders and Expectation of
New Domestic Orders in the Manufacturing Sector
of Investment Goods*
(Seasonally Adjusted)
(Seasonally Adjusted)
Registered Domestic Orders
Expectation of New Domestic Orders (right axis)
Registered Domestic Orders
Expectation of New Domestic Orders (right axis)
0
-5
-10
-15
-20
-25
-30
-35
-40
-45
-50
30
0
40
25
-10
30
20
-20
20
15
-30
10
10
-40
0
5
-50
-10
-60
-20
-70
-30
-80
-40
0
-5
-10
-15
12341234123412341234123412341
2007
2008
2009
2010
2011
2012
20132014
-90
-50
12341234123412341234123412341
2007
2008
2009
2010
2011
2012
20132014
* Question 19 in BTS for registered domestic orders (below normal-above normal) and question 21 in BTS for expectation of 3-month-ahead domestic
orders (increase-decrease).
Source: CBRT.
Inflation Report 2014-II
33
Central Bank of the Republic of Turkey
Chart 4.1.9.
Chart 4.1.10.
BTS Expectation for Investment and Employment*
Consumer Confidence*
(Seasonally Adjusted)
Expectation of Investment
Expectation of Employment
30
30
10
10
CNBC-e
TurkStat-CBRT (right axis)
124
85
114
80
104
75
* Question 23 in BTS asks the survey respondents the expectation of
fixed investment to increase or decrease in the upcoming 12-month
relative to past 12-month. Question 7 in BTS asks the survey respondents
the expectation of total employment to increase or decrease in the
upcoming 3-month.
Source: CBRT.
0414
0414
1013
0413
1012
0412
1011
0411
1010
0410
1009
0409
1008
0408
1007
0407
-70
1013
50
-70
0413
55
54
-50
1012
60
64
-50
0412
65
74
1011
84
0411
-30
1010
70
-30
0410
94
1009
-10
0409
-10
*Preliminary CNBC-e data for April.
Source: CNBC-e, TurkStat, CBRT.
To sum up, economic activity registered a mild increase in the second half of 2013 following the
robust course in the first half. The public sector followed a fluctuating course throughout the year, while
the private sector demand remained moderate. Due to domestic developments and the movements
in the exchange rates and interest rates in the first quarter, the private sector demand is expected to
grow at a decelerating pace in the first half of 2014. On the other hand, parallel to the waning
domestic uncertainties, the private sector demand is estimated to recover, while tight financial
conditions will limit this rise. Under these circumstances, domestic demand developments are expected
to partially restrain the recent cost-side pressures. Moreover, the anticipated slowdown in domestic
demand is believed to support the recent improvement in the current account deficit and the
balancing process.
4.2. External Demand
National accounts data of the last quarter of 2013 indicated that exports of goods and services
fell by 1.5 percent, while imports thereof rose by 9.3 percent in annualized terms. Thus, the negative
contribution of net exports to annual growth continued into the last quarter (Chart 4.2.1). In seasonally
adjusted terms, exports recorded a more pronounced increase than imports on a quarterly basis,
affecting the balancing among external demand components positively (Chart 4.2.2).
Chart 4.2.1.
Chart 4.2.2.
Contribution of Net Exports to Annual GDP
Growth
Exports and Imports of Goods and Services
(Seasonally Adjusted, 1998 Prices, Billion TL)
(Percentage Point)
Exports
Exports
Net Exports
8
6
4
2
0
-2
-4
-6
-8
-10
1
2011
2012
2
3
2011
4
1
2 3
2012
4
1
2
3
2013
4 1*
2014
Imports
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5
6.0
5.5
5.0
Millions
Imports
8
6
4
2
0
-2
-4
-6
-8
-10
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2006 2007 2008 2009 2010 2011 2012 20132014
* Estimate.
Source: TurkStat, CBRT.
34
Inflation Report 2014-II
Central Bank of the Republic of Turkey
Data regarding the first quarter of 2014 reveal that the export quantity index trended upwards in
the January-February period. The core index excluding gold exports continued with its steady trend
and posted a quarter-on-quarter increase in this period (Chart 4.2.3). Recent indicators on PMI point to
a sustained recovery on a global scale. As for medium-term indicators, the export-weighted global
growth continues to improve (Chart 2.1.1). In addition, exports are expected to contribute positively to
growth in the upcoming period amid the depreciation of the Turkish lira.
Chart 4.2.3.
Chart 4.2.4.
Export Quantity Indices
Import Quantity Indices
(Seasonally Adjusted, 2010=100)
(Seasonally Adjusted, 2010=100)
Exports
Exports (excl. gold)
140
Imports
140
120
120
100
Imports (excl. gold)
135
135
125
125
115
115
105
105
95
95
85
85
75
75
100
80
80
60
60
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2006 2007 2008 2009 2010 2011 2012 20132014
65
65
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2006 2007 2008 2009 2010 2011 2012 2013
2014
* Estimate for March.
Source: TurkStat, CBRT.
The import quantity index slumped in the January-February period; however, excluding gold, the
index posted a modest fall quarter-on-quarter. Due to the recent tightening in financial conditions
coupled with the measures taken, the growth rate of consumer loans lost pace. Accordingly, the
current data on the domestic sales of white goods and automobiles indicated a dramatic decline.
Analysis of these developments in quarterly terms leads to the anticipation that the deceleration in
domestic demand will pull both total imports and imports excluding gold down in the first quarter
(Chart 4.2.4). Accordingly, imports of goods and services are expected to fall in this period
(Chart 4.2.2).
In the first quarter of 2014, final domestic demand is expected to lose momentum, while exports
are estimated to restrain the effects of this deceleration on growth. It is projected that the re-balancing
will continue further and net exports will contribute positively to growth in this period (Chart 4.2.1).
The improvement in the seasonally adjusted current account balance is expected to
accelerate and the current account balance excluding energy and gold is envisaged to post surplus
again in the first quarter (Chart 4.2.5). On the other hand, the recovery in the 12-month cumulative
current account balance in nominal terms is anticipated to be slower and rather limited (Chart 4.2.6).
Inflation Report 2014-II
35
Central Bank of the Republic of Turkey
Chart 4.2.5.
Chart 4.2.6.
Current Account Balance*
Current Account Balance*
(Seasonally Adjusted, Billion USD)
(12-Month Cumulative, Billion USD)
Current Account Balance
Current Account Balance (excl. gold)
Current Account Balance (excl. energy and gold)
12
12
30
Current Account Balance
Current Account Balance (excl. energy and gold)
Current Account Balance (excl. gold)
30
6
6
10
10
1213
0813
0413
-90
2005 2006 2007 2008 2009 2010 2011 2012 20132014
1212
-90
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
0812
-70
0412
-70
-24
1211
-18
-24
0811
-18
0411
-50
1210
-50
0810
-30
-12
0410
-30
-12
1209
-10
0809
-10
-6
0409
0
1208
0
-6
* Estimate for March.
Source: TurkStat, CBRT.
4.3. Labor Market
Unemployment rates have recorded an increase as of the first quarter of 2013 amid the sluggish
course of non-farm employment. The third quarter was marked by the deepest slowdown in
employment such that the non-farm employment decreased, while unemployment rates surged
(Charts 4.3.1 and 4.3.2). In the January period covering the observations regarding the last quarter of
2013 and the first quarter of 2014, unemployment rates plummeted compared to the third quarter of
2013. The decline in unemployment rates was mainly driven by the rise in the non-farm employment
(Chart 4.3.2).
Chart 4.3.1.
Chart 4.3.2.
Unemployment Rates
Contributions to Non-Farm Unemployment
(Seasonally Adjusted, Percent)
(Seasonally Adjusted, Percent)
Employment Loss
Population Rise
Participation Rate
Non-Farm Unemployment Rate
Labor Force Participation Rate (right axis)
Unemployment Rate
20
Non-Farm Unemployment Rate
18
52
3
51
2
2
1
1
50
16
49
14
3
0
0
-1
-1
-2
48
12
47
10
46
-2
8
45
-3
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 41*
2006 2007 2008 2009 2010 2011 2012 20132014
-3
1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1*
2010
2011
2012
2013
2014
* 2-month difference as of January.
Source: TurkStat, CBRT.
In the first quarter of 2013, non-farm employment increased owing to the contributions of the
industrial and business services sectors. In the succeeding period, the slowdown in these sectors and
the employment losses in the construction sector caused the employment outlook to deteriorate
(Charts 4.3.3 and 4.3.5). Both in the last quarter of 2013 and in January 2014, non-farm employment
recorded an increase thanks to the construction and services sectors. Employment in the construction
sector increased far above the readings in early 2013, mostly amid the rise in unregistered employment.
Having trended downwards in the first half of 2013, unregistered employment followed a flat course in
36
Inflation Report 2014-II
Central Bank of the Republic of Turkey
the subsequent periods also owing to the rise in unregistered construction employment. Registered
employment, which slowed down gradually in the first three quarters of 2013, displayed an upsurge in
the following two quarters (Chart 4.3.4).
Chart 4.3.3.
Chart 4.3.4.
Employment in Services and Construction Sectors
Non-Farm Employment
(Seasonally Adjusted, Million People)
(Seasonally Adjusted, Million People)
2.0
13.2
1.8
12.7
1.6
12.2
11.7
11.2
10.7
0.6
10.2
0.4
9.7
0.2
9.2
7
13
6
12
5
11
0114
0713
0113
0712
0106
0706
0107
0707
0108
0708
0109
0709
0110
0710
0111
0711
0112
0712
0113
0713
0114
0112
4
0709
10
0711
0.8
8
14
0111
1.0
15
0710
1.2
9
0110
1.4
Informal (right axis)
16
Thousands
Formal
Services (right axis)
Thousands
Construction
Source: TurkStat HLFS, CBRT.
Even though industrial production continued to grow steadily since the second quarter of 2013,
the industrial employment displayed a limited rise (Chart 4.3.5). Leading indicators point to a mild
increase in industrial employment in the first quarter of 2014. The BTS indicator on expectation of
employment, which reflects the views of private firms operating in the manufacturing industry sector,
settled on a flat course in the first quarter (Chart 4.3.6). Similarly, having declined slightly in the last two
quarters, the PMI indicator, which is a benchmark for the manufacturing industry employment, followed
a flat course (Chart 4.3.6). In addition, production developments in the manufacturing of non-metallic
mineral goods, providing the construction sector with intermediate goods, signal a recovery in
construction activities in the first quarter of 2014 as well (Chart 4.1.6). Increases in construction
employment in the last two quarters are consistent with this indicator. The CBRT’s consumer confidence
index, which reflects households’ sentiments across Turkey, receded in the first quarter of 2014. Given
that the unemployment rate follows the confidence index with a lag, this outlook points to a possible
break in the deceleration of unemployment rate in the upcoming period.
Chart 4.3.5.
Chart 4.3.6.
Industrial Employment and Production
Employment Expectations and PMI Employment
Index
(Seasonally Adjusted, 2005=100)
(Seasonally Adjusted)
Industrial Employment
Industrial Production (formal)
Industrial Production (3-month moving average)
Source: TurkStat HLFS, CBRT.
Inflation Report 2014-II
0314
0913
0313
25
0912
30
50
0312
80
0205
0805
0206
0806
0207
0807
0208
0808
0209
0809
0210
0810
0211
0811
0212
0812
0213
0813
0214
80
35
60
0911
90
40
70
0311
90
45
80
0910
100
0310
100
50
90
0909
110
55
100
0309
110
60
110
0908
120
65
120
0308
120
PMI (right axis)
130
0907
130
0307
130
Manufacturing Industry Employment (HLFS)
Source: Markit, BTS.
37
Central Bank of the Republic of Turkey
Analysis of labor market developments with regard to domestic demand suggests that, parallel
to the rise in real wage payments in the last quarter of 2013, the robust course of employment points to
an increased support given by total wage payments to domestic consumption spending (Chart 4.3.7).
In the first half of 2013, the rise in hourly wages and the sluggish course of average productivity caused
real unit wages to maintain the upward trend. Due to the deceleration of the rise in turnover and hourly
wages, this trend paused in the third quarter (Chart 4.3.8). In view of the inflation projections, the
minimum wage amount to apply for 2014 does not imply a decline in real wages.
Chart 4.3.7.
Chart 4.3.8.
Household Domestic Consumption and Real
Wage Payments* (Annual Percent Change)
Real Unit Wages*
(Annual Percent Change)
Industrial
Manufacturing
Real Wage Payments
Consumption Spending (excl. furniture, household
appliances and maintenance, transport and communication,
recreation and culture)
14
12
10
8
6
4
2
0
-2
-4
-6
-8
14
12
10
8
6
4
2
0
-2
-4
-6
-8
1234123412341234123412341234
2007
2008
2009
2010
2011
2012
2013
* Calculated as the weighted average of total wages paid in
industrial, construction, trade, accommodation, catering, information,
communication, professional scientific and technical activities and
administrative and support services activities. Deflated by CPI.
Source: TurkStat Short-Term Labor Statistics, CBRT.
Services
25
25
20
20
15
15
10
10
5
5
0
0
-5
-5
-10
-10
1234123412341234123412341234
2007
2008
2009
2010
2011
2012
2013
* Calculated as the ratio of total wages to turnover for the services and
the ratio of total wages to production and the relevant PPI for the industrial
sectors.
Source: TurkStat Short-Term Labor Statistics, CBRT.
In sum, non-farm employment increased and the unemployment rate receded in the last
quarter of 2013 and in January 2014. Unemployment rates declined in January amid higher
employment in construction and services, while industrial employment continued to present a modest
outlook. Leading indicators point to a mild increase in non-farm employment in the first quarter of 2014.
However, the recent tightening in financial conditions, which may deteriorate economic activity in the
upcoming period, is viewed to be a potentially restraining factor on the improvement in employment
conditions.
38
Inflation Report 2014-II
Central Bank of the Republic of Turkey
Box
4.1
Revisions to Construction Investment Expenditures
This box presents an analysis of revisions to construction investment expenditures, which is a component of
national income. Construction investment expenditures are decomposed as public and private in the GDP
news bulletin and released quarterly by the TurkStat. Public construction investments pertaining to the first
three quarters of the year are temporary and are measured using data from the central government, local
administrations and social security institutions, which are compiled on a collection basis via surveys. Final
data on public investments are calculated using the finalized accounts of these institutions and released in
the last-quarter bulletin of the respective year. Thus, measurement of data in the last-quarter GDP bulletin is
on an accrual basis rather than on a collection basis, which leads to quite notable revisions in previously
announced data on construction investments for the first three quarters of the year.1
This study uses data on construction investments with base year 1998, covering the 2008Q1-2013Q4 period.
The study compares 3-quarter construction investments data released in the third-quarter bulletin to the
construction investments of the first three quarters released in the last-quarter bulletin, as public and private
investment expenditures are not subject to any notable retrospective revision in the second and third
quarters of the year. In other words, the public and private construction investment data in the third-quarter
GDP bulletin are quite close to those in the first and second-quarter bulletins. Hence, the last-quarter GDP
bulletin data are only compared to the third-quarter GDP bulletin data.
While construction investments in the last-quarter bulletins are not subject to any noticeable retrospective
revisions in total, the distinction between private and public construction investments can be apparent. In
other words, total construction investments for the first three quarters are not revised significantly in the finalquarter GDP bulletins as revisions to public construction investments are offset by revisions to private
construction investments. Table 1 presents the annual percentage changes in public, private and total
construction investment expenditures released in the third and fourth-quarter GDP bulletins.2 Accordingly,
the annual growth rate of public construction expenditures in 2013Q1, which was announced to be 81.8
percent in the 2013Q3 bulletin, was revised as 46.2 percent in the 2013Q4 bulletin. Thus, the growth rate of
public construction investment expenditures was revised downwards by 35.6 percentage points. On the
other hand, the first-quarter annual growth rate of private construction investment expenditures for 2013
was revised upwards by 9.1 percentage points (from -13.9 percent to -4.8 percent) in the final-quarter
bulletin (Chart 1). In terms of level, revisions to public and private construction investment expenditures are
in reverse directions, which cancel each other (Chart 2). This shows that revisions are distributed evenly
between public and private. Hence, evaluating construction investments on the basis of public and private
distinction may not be accurate by using data released in the first three quarters of the year, while data on
total construction expenditures may prove to be more reliable.
1
For further information on construction investment expenditures, see TurkStat (2012).
further information on national income revisions, see Günay (2011).
2 For
Inflation Report 2014-II
39
Central Bank of the Republic of Turkey
Table 1. Annual Growth Rates of Public, Private and Total Construction in Q3 and Q4 Bulletins
Public Construction
2008Q3
2008Q4
Bulletin
Bulletin
-14.0
17.3
-25.2
11.3
22.0
1.3
15.1
2009Q3
2009Q4
Bulletin
Bulletin
24.2
10.4
10.7
4.6
-9.2
-2.7
-1.0
2010Q3
2010Q4
Bulletin
Bulletin
-26.5
18.8
18.1
19.7
17.9
14.3
15.8
2011Q3
2011Q4
Bulletin
Bulletin
6.0
0.4
3.7
-2.0
9.7
3.8
-8.1
2012Q3
2012Q4
Bulletin
Bulletin
0.4
-4.2
-6.3
2.3
6.0
-1.0
7.4
2013Q3
2013Q4
Bulletin
Bulletin
81.8
46.2
37.1
25.2
11.5
21.2
29.2
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
Private Construction
2008Q3
2008Q4
Bulletin
Bulletin
4.8
-6.5
7.0
-9.0
-12.8
-12.5
-20.4
2009Q3
2009Q4
Bulletin
Bulletin
-28.7
-25.2
-31.6
-29.1
-21.8
-23.3
-8.8
2010Q3
2010Q4
Bulletin
Bulletin
19.7
4.8
22.9
19.9
26.8
25.1
19.1
2011Q3
2011Q4
Bulletin
Bulletin
18.2
21.0
17.6
20.1
11.6
13.2
12.3
2012Q3
2012Q4
Bulletin
Bulletin
3.0
4.0
1.8
-1.7
-3.1
-0.3
-0.4
2013Q3
2013Q4
Bulletin
Bulletin
-13.9
-4.8
-3.8
0.8
7.5
3.5
-2.0
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
2008Q1
2008Q2
2008Q3
2008Q4
2009Q1
2009Q2
2009Q3
2009Q4
2010Q1
2010Q2
2010Q3
2010Q4
2011Q1
2011Q2
2011Q3
2011Q4
2012Q1
2012Q2
2012Q3
2012Q4
2013Q1
2013Q2
2013Q3
2013Q4
Total Construction
2008Q3
2008Q4
Bulletin
Bulletin
1.1
-2.0
-1.4
-3.7
-3.4
-8.7
-12.3
2009Q3
2009Q4
Bulletin
Bulletin
-16.5
-17.0
-18.9
-19.0
-18.0
-17.1
-6.5
2010Q3
2010Q4
Bulletin
Bulletin
5.6
8.6
21.0
19.8
23.7
21.0
18.0
2011Q3
2011Q4
Bulletin
Bulletin
14.6
14.8
12.4
11.8
10.9
9.8
5.3
2012Q3
2012Q4
Bulletin
Bulletin
2.3
1.8
-0.8
-0.4
0.0
-0.5
2.0
2013Q3
2013Q4
Bulletin
Bulletin
10.1
8.1
10.0
9.1
8.9
9.6
8.0
Source: TurkStat.
Chart 1. Revisions to Annual Percentage Changes in
Public, Private and Total Construction Investments
between Q3 and Q4
Chart 2. Revisions to Public, Private and Total
Construction Investments between Q3 and Q4
(Fixed Prices, Thousand TL )
50
Public
40
Private
30
Total
50
250
40
200
30
150
20
20
10
10
0
0
-10
-10
-20
2008Q1
2008Q2
2008Q3
2009Q1
2009Q2
2009Q3
2010Q1
2010Q2
2010Q3
2011Q1
2011Q2
2011Q3
2012Q1
2012Q2
2012Q3
2013Q1
2013Q2
2013Q3
-40
Private
Total
250
200
150
100
100
50
50
0
0
-50
-50
-30
-100
-100
-40
-150
-150
-20
-30
Public
-200
Thousands
(Percentage Points)
-200
2012Q4
2013Q1
2013Q2
2013Q3
Source: TurkStat, CBRT.
40
Inflation Report 2014-II
Central Bank of the Republic of Turkey
Revisions significantly change the course of seasonally adjusted data as well (Charts 3 and 4). In seasonally
adjusted terms, data in third-quarter bulletin of 2013 signal a sharper contraction in private construction
expenditures than the quarterly contraction experienced during the global crisis. However, the revised data
in the last-quarter bulletin indicate a more limited contraction in private construction expenditures in the first
quarter. Meanwhile, public construction investments, which displayed a rapid rise in the first quarter, were
revised downwards to exhibit a modest growth.3
Chart 3. Public Expenditures on Construction
Investments
Chart 4. Private Expenditures on Construction
Investments
(Seasonally Adjusted, Fixed Prices)
(Seasonally Adjusted, Fixed Prices)
2013Q3
16
2013Q4
15
15
14
14
13
13
12
12
11
11
10
10
9
9
8
8
7
7
1
2
3
2011
4
1
2
3
2012
4
1
2
3
22
x 100000
16
2013Q3
22
2013Q4
21
21
20
20
19
19
18
18
17
17
16
2013
16
1
2
3
2011
4
1
2
3
2012
4
1
2
3
2013
Source: TurkStat, CBRT.
In sum, total construction investments are not subject to a major revision in the last-quarter GDP bulletin,
while public and private construction investments were revised significantly. This calls for caution in
evaluating data on public and private construction investments, which are released in the first three
quarters; whereas assessments using data on total construction investments are considered to be more
reliable in the first three quarters.
REFERENCES
Günay, M., 2011, Milli Gelir Güncellemeleri (in Turkish), CBT Research Notes in Economics No. 11/21.
TurkStat, 2012, Üretim ve Harcama Yöntemiyle Gayri Safi Yurtiçi Hasıla Tahminleri, Kavram, Yöntem ve
Kaynaklar (in Turkish), TurkStat Publication No. 3662.
Last-quarter data on construction investments announced in 2013 are seasonally adjusted and the seasonal factors are obtained. In the next
step, construction investments data released in 2013Q3 are seasonally adjusted using these factors in order to eliminate the effect of retrospective
revisions that may arise from seasonal adjustment.
3
Inflation Report 2014-II
41
Central Bank of the Republic of Turkey
Box
Capital Flows Towards Turkey and Emerging Economies in 2013: Effects of the Fed’s
4.2
Policy Change
In
the post-crisis period, additional monetary easing measures taken by central banks of advanced
economies, particularly the Fed, invigorated the expectations that low interest rate and ample liquidity
conditions would be maintained for a long time in these economies. This caused an improvement in global
risk perceptions and an increased attraction of investors to risky assets with high returns. Meanwhile, given
the low course of economic growth in advanced economies, the high growth performance and the
relatively high interest rates in emerging economies supported this trend and accelerated portfolio flows to
emerging economies, particularly Turkey. However, two major developments that adversely affect the
capital flows towards emerging economies and Turkey have been experienced since the global crisis in
2008:
1)
In the third quarter of 2011, increased concerns over the sustainability of public debt in the Euro
Area, particularly Greece, led to marked downside risks in the global economy. Accordingly,
capital flows towards emerging economies lost pace in tandem with the deterioration in the risk
appetite, which adversely affected the capital flows towards Turkey as well.
2)
In May 2013, the Fed announced that asset purchases, the major pillar of its quantitative easing
policy, would be gradually cut and terminated in mid-2014. The associated uncertainty regarding
the normalization of the Fed’s monetary policy strengthened the perception that the ample
liquidity conditions in global markets would end. This caused capital outflows from emerging
economies, including Turkey, with high external financing needs.
Against
this background, this box gives an analysis of the effects of the Fed’s decisions regarding the
normalization of its monetary policy and its resort to forward guidance on the capital flows to Turkey and
emerging economies across 2013.
Chart 1. Capital Flows to Turkey
(12-Month Cumulative, Billion USD)
Other (FDI+Bond Issues+Loans)
100
80
80
60
60
40
40
20
20
0
0
-20
0108
0408
0708
1008
0109
0409
0709
1009
0110
0410
0710
1010
0111
0411
0711
1011
0112
0412
0712
1012
0113
0413
0713
1013
-20
Thousands
Portfolio Flows (Equity+Government Bonds+Bank Deposits)
100
Source: CBRT.
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Inflation Report 2014-II
Chart 3. Subcategories of Capital Flows Affected by
the Fed’s Decision
(12-Month Cumulative, Billion USD)
(12-Month Cumulative, Billion USD)
60
50
50
40
40
30
30
20
20
10
10
0
0
-10
-20
-20
0108
0508
0908
0109
0509
0909
0110
0510
0910
0111
0511
0911
0112
0512
0912
0113
0513
0913
-10
50
Equity
Government Bonds
Bank Deposits
50
40
40
30
30
20
20
10
10
0
0
-10
-10
0108
0508
0908
0109
0509
0909
0110
0510
0910
0111
0511
0911
0112
0512
0912
0113
0513
0913
Private Sector Loans
Bank Loans
Bond Issues (Public+Private)
FDI
60
Thousands
Chart 2. Subcategories of Capital Flows Unaffected by
the Fed’s Decision
Thousands
Central Bank of the Republic of Turkey
Source: CBRT.
Chart 1 shows the subcategories of capital flows towards Turkey on an annual basis. Accordingly, three
findings stand out for 2013. Firstly, capital flows displayed a steady and gradual increase until May 2013.
Secondly, capital inflows started to decelerate as of May. Thirdly, this deceleration was not even across
subcategories. This last finding needs further discussion. In other words, short-term financing items
experienced outflows since May 2013 that have been driven by portfolio flows, which are composed of
equity, government bonds and bank deposits. On the other hand, foreign direct investments, bond issues,
bank loans and private sector loans, which are considered to be relatively reliable sources for the financing
of the current account deficit in Turkey continued on a steady uptrend (Charts 2 and 3). Meanwhile,
rollover ratios of long-term loans by banks and the private sector also increased following May. In fact, this
ratio, which stood at 110 on average in the January-April period of 2013, went above 130 in the May-June
period. Accordingly, even though total capital inflows lost pace due to portfolio flows after the Fed’s
announcement in May, financing of the current account deficit was mostly provided by long-term
resources.
Meanwhile,
other emerging economies also experienced portfolio outflows following the Fed’s
announcement in May. An analysis of 12-month cumulative portfolio flows reveals that these outflows were
largely driven by equity and bonds, with more severe outflows in the latter. In this period, Turkey followed a
course similar to other emerging economies with respect to outflows in equity funds, while experiencing a
relatively lower outflow in bond funds.4 Also, compared to the Euro Area crisis in 2011 when sudden capital
outflows were experienced, Turkey saw a relatively limited effect on portfolio outflows (Charts 4 and 5).
4
Some portion of the fall in portfolio investments towards emerging economies and Turkey were also driven by price changes.
Inflation Report 2014-II
43
Central Bank of the Republic of Turkey
Chart 4. Flows of Equity Funds
Chart 5. Flows of Bond Funds
(12-Month Cumulative, Billion USD)
(12-Month Cumulative, Billion USD)
Turkey (right axis)
10
60
50
40
40
30
30
4
20
20
2
10
10
0
0
1213
0713
0213
0912
-30
0412
-20
-30
1111
-10
-20
0611
1213
0713
0213
0912
0412
1111
0611
0111
0810
0310
1009
0509
-4
1208
-60
0708
-2
0208
-40
-10
0111
0
-20
0810
0
0310
20
1009
40
0509
6
1208
8
60
Turkey
50
0708
80
Emerging Economies*
60
0208
Emerging Economies*
100
* Includes 40 emerging economies with Brazil, China, Colombia, Hungary, Indonesia, Malaysia, Mexico, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and
Turkey having share above 2 percent.
Source: EPFR, CBRT.
In sum, following the Fed’s announcement on its taper of asset purchases as part of a gradual exit from the
quantitative easing policy, Turkey and other emerging economies experienced capital outflows in the
second half of the year that were mostly driven by portfolio investments. Two major points stand out
regarding capital flows towards Turkey in this period. Firstly, the deceleration in capital flows was mostly
seen in short-term items like equity, bonds and deposits, while other main categories (loans, FDI, bond
issues) did not experience a notable change. Secondly, equity and bond funds, which saw outflows,
exhibited a less negative course compared to emerging economies. Accordingly, in terms of capital flows,
Turkey did not unfavorably diverge from other emerging economies. These points indicate that capital flows
towards Turkey and other emerging economies slowed mainly upon push factors (the deterioration in the
global risk appetite) rather than country-specific pull factors in the second half of 2013. Hence, the Fed’s
decisions on normalizing its monetary policy are expected to remain as a determinant factor in the course
of capital flows towards emerging economies.
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Inflation Report 2014-II