4 percent growth rate target is still achievable. In addition, industrial output figures for January imply that a mild recovery has started.

The Turkish Statistical Institute, TURKSTAT, has updated the industrial output index and released a completely new series with base year 2010=100. I am using working day adjusted figures. Annual industrial output growth decreased constantly between the first quarters of 2011 and 2012, floated around low levels until the fourth quarter and decreased further until the end of the year. Here are the figures (please note that all indicate year-on-year growth):

In the first quarter of 2011, industrial output grew impressively by 14.9 percent. The rates for the first and last quarters of 2012 were 2.7 percent and 0.9 percent, respectively, making fourth quarter the worst one of the year in terms of growth performance.

TURKSTAT also released the industrial output figures for January 2013: industrial output increased year-on-year by 1.8 percent. Three-month averages demonstrate a clearer picture as monthly growth figures might fluctuate. In the period between November 2012 and January 2013, industrial output increased by 1.3 percent. Output growth was stronger compared to the last quarter of 2012 and weaker compared to the first three.

The figures are consistent with the capacity utilization ratio (CUR) released earlier. CUR decreased year-on-year throughout 2012. The decline was stronger between August and January. CUR declined also in February, but at a smaller rate.

There is one more point to take into account in order to correctly read the relationship between the CURs and industrial output. They move in the same direction, but their turning times might be different, with the CUR changing its direction with a delay of a month or two. Figure 1 depicts the developments I summarized so far.

Was this the case also this month? In other words, has the recovery started? If it has, is the 4 percent growth target feasible? International developments are still in harmony with the assumptions I made earlier, in spite of the elections result in Italy. Domestic credit developments mainly will determine Turkey’s growth performance in 2013 unless the circumstances worsen in the US and Europe. The objective to keep the credit growth rate at 15 percent and limited income growth in export markets overall in 2013 are factors that will limit Turkey’s growth in 2013. On the other hand, the low-interest policy will probably increase the consumption of those who are in need of loans. Hence, 4 percent growth rate target is still achievable. In addition, industrial output figures for January imply that a mild recovery has started.

Figure 1. Industrial output and capacity utilization ratio: January 2008 – February 2013 (working day adjusted figures, annual % change – latest production output figure for January)

Source: TURKSTAT

This commentary was published in Radikal daily on 09.03.2013