Turkey is scheduled to report its third-quarter GDP figures on Monday. For many traders, it will be at the end of an extended weekend. The economic situation in Turkey is, shall we say, complicated. Even though the data is relatively old at this point, it could help provide a boost for the lira.
Despite a resurgence in risk appetite in global markets this week, the lira has once again started weakening. Nearly half of the gains were erased following the surprise move by the CBRT earlier in the month.
Why is GDP Expected to be Upbeat?
Turkey has seen the same spike in covid cases as most of the world has, with daily confirmed infections growing past the peak seen in the spring. But, the pick-up in cases was relatively delayed, presumably as colder weather reached the country later than further north in Europe.
On the other hand, it would imply that Turkey has longer to go before reaching the peak, compared to, for example, France.
The delayed increase in cases means that Turkey managed to get through the whole third quarter before reimposing restrictions. However, the geopolitical tensions of the time and the lack of travel still likely weighed on the economy. And the predictions of economists show that Turkey is likely not to show as strong of a rebound.
What We Are Looking For
The consensus of expectations is a bit shaky and has been moving higher recently. This suggests that there is a chance that the market is looking to price in the higher end of forecasts. In terms of market reaction, it could mean that there is more risk of the lira weakening in the aftermath of the results. This is even if they meet or surpass expectations by a little bit.
The latest survey of Turkish economists sees the economy growing by 5.0% in the third quarter. This is compared to negative growth of 11% in the second quarter. Note that Turkey already had negative growth in the first quarter as well. The range of forecasts is pretty large, from 3.5-6.8%.
Among international economists surveyed by Reuters, the range is even larger, from -1.5% to +6.8%, though the average settles around 4.8%.
Looking Further Ahead
Despite the expected lackluster performance in the third quarter, economists still see things improving for Turkey for the rest of the year. Part of this is attributed to the more aggressive stance of the CBRT. Another part is on the expectation that lockdown measures will be less severe this time around. The economy might even continue to grow from here to the end of the year.
The government expects the economy to grow by 0.3% this year, compared to an average of 0.0% among economists surveyed by Reuters.
Should we get a substantial beat over expectations in Monday’s data, those forecasts might be revised higher and support the lira. However, as mentioned, there is a larger chance of disappointment, which could provide more weakness for currency.