(Bloomberg) — One of the world’s worst inflation crises has yet to derail Turkey’s economy, as an upswing in consumer spending and tourism propels growth to among the fastest in the Group of 20.
Cheap money has added an extra kick to the $800 billion economy that’s expanded at a clip of over 6% every quarter since it roared back to life with the easing of coronavirus lockdowns in 2020.
Although inflation has kept climbing this year to levels unseen for over two decades, gross domestic product rose an annual 7.4% in the second quarter, a slight increase from the prior three months, according to the median forecast of 18 economists surveyed by Bloomberg.
Data due Wednesday will also show GDP growth accelerated to 1.5% in seasonally and working-day adjusted terms, a separate poll found.
Facing a tradeoff between growth and inflation ahead of elections next year, President Recep Tayyip Erdogan has championed an economic model that prioritizes exports, production and employment at the expense of price stability and the currency.
Turkey’s longest-running leader — an advocate of low interest rates — is leaning on the resilience of households and companies in coping with annual inflation that will likely peak past 80% with the lira at a record low.
What Bloomberg Economics Says…
“Private consumption is likely to have grown by double-digits over the year in the second quarter, with households front-loading their purchases in response to the high inflation environment. In addition, net exports probably contributed about 3 percentage points to annual growth. Investment spending, however, is likely to show a decline.”
— Selva Bahar Baziki, economist. Click here for more.
Treasury and Finance Minister Nureddin Nebati, who has estimated that GDP growth quickened in the second quarter, said this month that “we are not compromising on growth.” Speaking in a televised interview, he said that “when we do not compromise on growth, combating inflation takes time.”
Rather than acting to put a brake on prices, central bank Governor Sahap Kavcioglu has held back from monetary tightening since slashing rates by 500 basis points late last year. A shock rate cut this month took Turkey’s benchmark to nearly 67% below zero when adjusted for inflation, the world’s most negative policy rate.
Spending, Tourism
The stimulus has heated up demand and lending in an economy where spending by households accounts for more than half of output. Turkish credit card use for shopping saw an increase of over 112% in the April-June period from last year, according to Interbank Card Center data.
Booming tourism has delivered another boost, with arrivals and spending by foreigners surging by well over 100% so far this year.
Turkey’s growth spurt may, however, be close to running its course. A separate survey of analysts this month indicated annual GDP growth may slip to 3.3% this quarter and 1.3% in the final three months of the year.
Signs of a slowdown have already emerged in industrial production and retail sales, with business conditions among Turkish manufacturers last month deteriorating the most since the first wave of the coronavirus pandemic.
The threat of a recession in Europe is especially a worry because it’s the main destination for Turkish exports. The central bank already pointed to “some loss of momentum” in the economy as the rationale for its rate cut this month.
The ultra-loose policies can also come back to haunt Turkey. Economists at ING Bank AS have warned that “a higher risk premium in financial markets and growing macro-stability risks could weigh on domestic demand,” according to a report.
“We’re seeing continued cost pressures, tighter global financial conditions, and a challenging local regulatory environment, putting pressure on the corporate sector,” ING analysts including Muhammet Mercan said. “There’s a likely loss of momentum in exports given the slowdown in the eurozone.”
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
