Turkish economic confidence slumps to lowest in 15 months

Turkey’s economic confidence slid to the lowest level since February last year after the lira slumped to record lows against the dollar and the central bank increased interest rates.

Confidence dropped to 93.5 in May from 98.3 in April in a fourth month of declines, data from the Turkish Statistical Institute showed on Wednesday. A reading below 100 shows pessimism about the future.

Turkish economic confidence

Turkish President Recep Tayyip Erdogan is seeking re-election in presidential elections on June 24. The latest data may add to concern among his political allies that he may not gain sufficient support in a first round of voting, forcing him into a run-off against his nearest rival.

Consumer, services, manufacturing, retail trade and construction confidence all fell. Confidence in services led the declines, dropping to 92 from 97.1.

Confidence in manufacturing, or the real sector, was the only sub index to remain in positive territory, edging down to 106.7 from 106.8. Manufacturers have received tens of billions of dollars in loan guarantees and investment incentives from the government over the past year as it sought to stimulate economic growth ahead of elections. Exporters are also benefitting from the cheaper lira, which makes their goods more competitive in terms of price.

Retail trade confidence fell to 97.1 from 100.3.

The lira plummeted to a record low of 4.92 per dollar last week, prompting the central bank to increase interest rates by 300 basis points to 16.5 percent in an emergency meeting. The currency has since recovered to about 4.5 per dollar but has still lost more than 10 percent during May.

The economic confidence index is a composite index that encapsulates consumers’ and producers’ evaluations, expectations and tendencies about the general economic situation in Turkey.