According to figures provided by Turkey’s state statistical institution TÜİK (TurkStat), Turkey’s seasonally adjusted economic confidence decreased by 3.5% to 86.4 points in December 2020 from 89.5 points in the previous month of November. This decrease follows rallies of 20.4% in May, 19.1% in June, 11.8% in July, 4.4% in August, 3.1% in September, and 4.8% in October following an initial collapse of 44.1% in April due to the onset of the coronavirus pandemic. The recoveries of the index between May and October reflect expectations that the economy would normalise following the initial lockdown beginning in March. However, the worsening pandemic situation in Turkey in November and the change in the government’s economic team avowing to follow a tighter fiscal and monetary policy to combat inflation and support the Turkish lira, both led to that month’s decrease of 3.5% in the economic confidence index. This month’s further decrease of 3.5% in the index reflects the Turkish Central bank’s additional increase in its interest rate of 200 basis points to 17% and continued fiscal tightening. This month’s 86.4 points level of the economic confidence index compares with the pre-pandemic 91.8 points recorded in March 2020.
In December, changes in the sub-indices are as follows: the consumer confidence sub-index remained the same at 80.1 points, the real sector confidence sub-index increased by 2.8% to 110.4 points, the services sector confidence sub-index decreased 9.2% to 70.4 points, the retail trade sub-index decreased by 7.8% to 87.6 points, and the construction sub-index decreased by 7.2% to 73.3 points.
Despite periodic upward revisions by TurkStat, Turkey’s economic confidence index is still below the crucial 100 points level. In Turkey, the economic confidence index is a composite index that covers encompasses consumers’ and producers’ evaluations, expectations and tendencies about the general economic situation. The index is produced by a combination of a weighted aggregation of normalized sub-indices of consumer confidence, seasonally adjusted real sector (manufacturing industry), services, retail trade and construction confidence indices. The economic confidence index indicates an optimistic outlook about the general economic situation when the index is above 100, and contrarily indicates a pessimistic outlook when it is below 100.