In the first quarter of 2018, Turkey, together with India, started the new year with a new record of 7.4 percent gross domestic product growth year-over-year. Let's remind ourselves that in 2017, Turkey realized the highest growth among the G-20 and Organization for Economic Co-operation and Development (OECD) countries with 7.4 percent.
Having said that, some economists prefer to look at the quarter-over-quarter increase in GDP. Accordingly, the G-20 countries that had an average growth of 1 percent quarter-over-quarter in the last quarter of 2017, could keep this rate at 0.9 percent in the first quarter of 2018. While South Africa and Japan are experiencing contraction, France's growth performance fell down to 0.2 percent, the U.K. 0.1 percent, Germany 0.6 percent, the U.S. 0.5 percent, Canada 0.3 percent and China 1.4 percent. While India increased its quarter-over-quarter performance to 1.9 percent, when compared to 2017's last quarter, Turkey rose from 1.7 percent to 2 percent, thus is ranked as first country in terms of quarter-over-quarter level.
Turkey, in the first quarter of 2018, sustained its growth with the continued powerful contribution of the consumer spending with respect to Turkish citizens' daily lives. The liveliness in the domestic market is reflected on household consumption expenditures as 11 percent. As the exports of goods and services are once again breaking records over the record volume, the real increase is only at 0.5 percent. As Turkey's dependence on imports for production to sell both domestic and abroad, the record growth and increase in production naturally brings a 15.6 percent increase in imports. When compared to the same quarter of the previous year, the increase in added value for the agricultural sector was 4.6 percent, the industrial sector was 8.8 percent, and the construction sector was 6.9 percent. Trade, transportation, accommodation and food services that we can define as the services sector achieved a rise in added value of 10 percent with regards to very dynamic domestic market and a significant increase in the number of tourists visiting Turkey.
Even though the international rating agencies and some international financial institutions shared their predictions that Turkey will grow less than 3 percent, even 2.5 percent, following the 7.4 percent of record growth in the first quarter, if Turkey grows by 3 percent in the rest of the three quarters, the overall growth would reach 4.1 percent for 2018. This is why, the World Bank has revised Turkey's growth as over 4 percent for 2018. The views that Turkish economy would grow first close to zero following the second quarter, especially in the second half of the year, and then will experience negative growth do not reflect the reality. Industrial production data for April that was announced in the past few days, 6.2 percent, although shows a little loss when compared to the first quarter, strengthened the forecasts that growth in the second quarter would at least be in the range of 4-5 percent.
Credit rating agencies in the offside
In this case, while there is no deterioration in Turkey's budget deficit/GDP or public debt stock/GDP and Turkey is in a much better position at these rates than most G-20, OECD and EU countries, it is very interesting that international rating agencies are competing with each other to drop Turkey's grade down or to push the Turkish economy's appearance to negative. For example, while Greece's debt turnover still remains uncertain and the Italian economy is not giving any positive signals, for some reason, the same aggressive attitude on downgrading is not adopted for these countries. Thus, the double standard continues.
A critical issue in the coordination of economic administration is the right analysis and international comparison of the Turkish economy's macro data and the main issues that are led by the Turkish private sector, financial sector and the economy media. For example, consider the real sector debts of countries. China's non-financial private sector, thus the real sector's non-bank debt's ratio to GDP, which was 99 percent in 2007, has reached 171 percent today. Brazil's ratio increased from 31 percent to 50 percent, India's from 42 percent to 51 percent, Russia's from 39 percent to 59 percent, Mexico's from 15 percent to 25 percent, South Africa 35 percent to 37 percent, Turkey debt ratio rose from 25 percent to 61 percent. Brazil, India and South Africa's total sovereign debt is 4 to 74 percentage points above Turkey's.
China's ratio is getting close to 300 percent. The average for the ratio of real sector bank debts to national income for the eurozone is 90.3 percent, the U.S.'s is 52.1 percent, and Greece's is 101.9 percent. The ratio of China's real sector debt in foreign currency to its GDP is 10 percent, India's is 17 percent, Russia's is 37 percent, Turkey's is at 35 percent. Globally, the real sector's debt in foreign currency is $40 trillion. Turkey, among the developing countries, has the lowest foreign currency bond issuance in real sector. Thus, in such a case, we should seriously question this degree of competition of the rating agencies to lower the rating of Turkey's.
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