Increasing indebtedness deepened macroeconomic vulnerabilities in the second quarter of 2023 According to the Macroeconomic Imbalance Indicators adapted to Turkey by TEPAV and updated on a quarterly basis, while the improvement in employment indicators became evident in the second quarter of 2023, increasing indebtedness and expanding current account deficit deepened internal and external macroeconomic vulnerabilities.

The 12th issue of Macroeconomic Imbalance Indicators, established by TEPAV and updated on a quarterly basis, have been published. Accordingly, while the improvement in employment indicators became evident in the second quarter of 2023, increasing indebtedness and the increase in the current account deficit deepened internal and external macroeconomic vulnerabilities.

According to the updated indicators regarding the MIP Scoreboard, the decline in the real effective exchange rate accelerated in the second quarter of 2023, while the contraction in unit labor costs continued. The weak Turkish lira and low unit labor costs supported the ongoing increase in Turkey's world export share, and the increase in this indicator became evident in this quarter. Despite this, due to the fact that import expenditures increased higher than export revenues, the indicator regarding the current account deficit exceeded the threshold value in the first two quarters of 2023 for the first time after 2015.

The increase in financial sector liabilities reached the highest level in the last 10 years

The increase in the liabilities of the financial sector exceeded the threshold value by 4 times and reached the highest level in the last 10 years. Similarly, the house price index indicator was 7 times above the threshold value, further pressuring financial stability. Although the ratios of general government and private sector debt stock to GDP, which are both below the threshold values and started to trend upward in the second quarter of 2023. Private sector credit utilization accelerated and the related indicator was above the threshold value for the first time after 2017.

The headline unemployment rate remained at double digits

The improvement in employment indicators became evident in this quarter and all indicators remained within the threshold values. Despite this positive trend in employment indicators, the fact that the headline unemployment rate is still at a double-digit level and the youth unemployment rate is close to 1.5 times this indicates that it is necessary to continue the improvement in the employment field in order to establish strong macroeconomic balances.

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