Real GDP contracted by -2.4% q/q in Q4 2018, confirming the (technical) recession we have long predicted. In addition, the figures for previous quarters were markedly revised downwards: to -1.6% q/q in Q3 (from -1.1%); +0.05% q/q in Q2 (previously +0.6%); +0.9% q/q in Q1 (previously +1.7%). As a result, full-year GDP growth came in at just +2.6% in 2018, down from +7.4% in 2017. Moreover, the growth carry over for 2019 now stands at -2.6%. Hence we will revise downwards our growth forecast for this year to about -0.7%. In y/y terms, Q4 GDP dropped by -3%, driven by nosediving consumer spending (-8.9% y/y), fixed investment (-12.9%) and inventories (-4.7pp). Imports plunged (-24.4% y/y) in line with domestic demand while exports rose by +10.6% as firms’ competitiveness has improved due to the sharp TRY depreciation (-33% in 2018). The rebalancing of the external sector continued in early 2019. The current account posted a modest monthly deficit of -USD0.8bn in January, much smaller than a year ago (-USD7.0bn in January 2018) so that the rolling 12-month deficit continued to narrow to -USD21.6bn in January 2019, down from a recent peak of -USD58bn in May 2018. We expect a current account deficit of around -2% of GDP in 2019 (down from -5.6% in 2017).
