Industrial production is falling fast. Increasingly pessimistic expectations for the future.

Let’s take a look at the economic data released in Turkey last week to give us an idea about the current state of the economy.

Industrial Production falling fast

Industrial production numbers from the end of 2018 demonstrate a clear collapse. Let’s illustrate it with a graph from the Turkish Statistical Institute

This chart clearly shows the rate of decline in industrial output.

The drop in retail sales gaining traction

We have a chart for this indicator as well. It shows us the downfall in retail demand

This is what the supply and demand indicators show. Now, let’s focus on the public sector.

What is the source of the budget surplus?

An amendment was recently made to the law where the central bank profits would be transferred to Treasury in January rather than the customary April. The amount this year was 33 billion Turkish Liras.

Here is how the budget looked like in January (source: Ministry of Treasury and Finance)

BUDGET Jan-18 Jan-19 Change (%)
Income 58.4 95.6 64%
Tax Income 52.0 55.7 7%
Other Income 6.4 39.9 523%
Enterprise and Ownership Revenue 1.0 35.1 3410%
Expenses 56.5 91.9 63%
Non-interest expenses 50.5 84.6 68%
Interest expenses 6.0 7.3 22%
Budget Balance 1.7 3.7 118%

As can be seen from the table, budgetary expenses in January of 2019 increased by 63% since last year. Most of this increase was due to non-interest expenses. In contrast, the increase in tax collection, the state’s chief source of income, has increased by 7%. The real increase in total income was influenced by enterprise and ownership revenues. You may wonder how there was an increase of 3410% in that one item alone. Well, that’s thanks to the early collection of central bank profits.

Had they not amended the law and not withdrawn the 33 billion profits, the budget would show a deficit of TRY29.3 billion.

Although the budget may seem positive on first look, when you consider that tax income increased by only 6% while non-interest expenses have ballooned by 68%, you can see that current state of affairs cannot continue as they are.

Current deficit is falling

When industrial production and retail sales are falling, economic growth will fall, too. And when growth goes down, so do foreign trade deficit and current deficit.

Since most of the production in Turkey uses imported inputs, the fall in those indicators would no doubt bring the imports and thus current deficit down. So, we can say the current deficit is falling because pf the fall in economic growth, and this is not a positive.

Unemployment jumps

According to November 2018 numbers released by TSI, unemployment has reached 12.3%.

The table below compares the employment and workforce data for 2017 and 2018. (source: Turkish Statistical Institute)

1000 People Nov-17 Nov-18 Change (%)
Workforce        31,790        32,295 1.59%
Employment        28,515        28,314 -0.70%
Eager to Work           2,219           2,136 -3.74%
Workforce at Large        34,009        34,431 1.24%
Unemployed           3,275           3,981 21.56%
Unemployed at Large           5,494           6,117 11.34%
Official Unemployment (%) 10.3 7.3
Unofficial Unemployment (%) 16.2 3.7

The table shows that while workforce increased by 1.6%, employment fell by 0.7% and the number of unemployed has spiked by 21.6%. According to the survey’s last four weeks of data, official unemployment rate is at 12.3% while unofficial unemployment (i.e. Including those who are not actively seeking jobs) is higher at 17.8%.

Expectations for the future increasingly dim

TSI’s January report details a falling economic confidence index which means expectations for the future are dire.

The confidence index was standing at 105.2 in January of 2018. This number, one year later, is now at 78.5. Even the monthly drop from the previous month, which was 81.9, is still a pretty large fall.


The expectations are high for an economic depression thanks to high inflation, slowing economic growth, increasing unemployment and current deficit.

Turkey’s situation is not getting any help from global economic activity, either: although there seems to be a recovery in US-China trade relations, the slowing down of Chinese economy, the Brexit issue between the EU and UK, social unrest in France, adverse political and economic situation and expectations in Italy, Japan’s inability to recover from stagnation, the unrest in South American countries such as Argentina and Venezuela -none of it is helping Turkey’s case.

With global economic expectations being overtly negative influencing Turkey’s standing, the problems ahead of us seem to be growing still.

Originally published in Turkish at:,808500