Video|5 September 2024

MENA – Economic Slowdown in Turkey, While GCC Shows Mixed Signals

The Turkish economy slowed markedly to 2.5% year-on-year in Q2 2024, down from 5.3% in Q1, falling short of both our and market expectations. This deceleration is driven by tighter monetary and credit conditions, with consumers weighed down by higher borrowing costs, increased petrol prices, and recent VAT hikes. August’s PMI numbers further indicate ongoing strain on domestic demand, as firms are holding off on production. We expect tight policies to continue dampening consumer spending into 2025, supporting our below-consensus GDP forecast of 1.9% next year.

Regional PMIs reveal mixed trends in non-oil activities. In Saudi Arabia, demand is driven by employment growth and an uptick in new orders. Egypt saw business activity rise for the first time in three years, though uncertainty still persists. Kuwait’s output hit a 19-month low, while Qatar experienced strengthened demand. We expect demand to be subdued in Kuwait but to be robust in the rest of the GCC region, with an overall non-oil GCC GDP forecast of 4.2% this year.

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