Analysts are weighing up comments in a report from Germany’s Commerzbank which concludes that Turkey’s official growth figures are “more than questionable” and could even have been “politically influenced”.

The conclusions - first reported on September 13 by the Financial Times - would prove highly damaging to Ankara if borne out, given that investors are already nervous about Turkey, a country that has been under a declared state of emergency for 15 months following last year’s attempted coup. Turkey, subject to President Recep Tayyip Erdogan’s right to rule by decree under emergency powers, in April faced accusations that a narrowly won referendum vote on introducing an executive presidency was fiddled, while it is also fending off claims that the record stock market highs and new economic buoyancy it has enjoyed this year have been too much founded on soft loans backed by the government’s TRY250bn ($72.3bn) credit guarantee fund (CGF).

Germany’s second-largest bank Commerzbank took issue with the latest GDP growth figures, hailed by ministers. The Q2 GDP growth figure of 5.1% - only exceeded by China and India among G20 economies - indicates Turkey has bounced back from last year’s political woes to become one of the world’s fastest-growing economies with economic confidence at a five-year high. In a report entitled “Turkey – Are you kidding me?” Commerzbank’s emerging markets strategist Lutz Karpowitz raised great scepticism over the rebound, questioning, for instance, the reliability of figures showing recoveries in tourism and foreign investment.

‘If only your miracle was happening’
In a scathing conclusion, the bank, in which the German government holds a large stake - something that may help those coming to the defence of Turkey’s data, given the ongoing war of words between Ankara and Berlin over human rights, and claims that Turkey is sliding towards an authoritarianism that makes it unfit for EU membership - concluded that it “would be very pleased for Turkey if the economic miracle really was happening”.

However, Ankara is not without its defenders among European economists. Timothy Ash, senior sovereign strategist at BlueBay Asset Management, said in a note to investors responding to the Commerzbank report: “I don't understand why Commerzbank want to focus on the national accounts data and are trying to make such a harsh and divisive political point. There are major issues over Turkish economic policy which I would have thought would be a better tack to take, including high inflation and the need for the [central bank] to do more to tighten and enhance its own inflation fighting credibility, structural reform and addressing the still wide current account deficit.”

He added: “The bigger question is not for me… the accuracy of the GDP stats, or indeed why the Turkish economy is doing so well on the growth front, but why it is not doing better given cheap oil, cheap global financing, the competitive lira, and strong underlying strengths (demographics, banks, public finances).”

Looking at Turkey’s claimed tourism recovery, following waves of terror attacks, the failed coup and a falling out with Moscow that drove down visitor numbers, Commerzbank questioned the official data showing the country’s tourist industry making a big comeback this year. The gains have partly been attributed by officials to the weaker lira and restored relations with the Russians, but Karpowitz was not convinced that increased arrivals from Russia and the Middle East could make up for falling numbers from western Europe, particularly Germany.

Germans, he noted, typically accounted for 15% of Turkey’s tourism arrivals in recent years, but rising tensions between the two nations have discouraged travel this year. Germany’s foreign minister even warned in July that Turkey was unsafe for visitors, and Commerzbank estimates that less than 1.5m Germans will travel to Turkey in 2017, down from 3.9m in 2016, the FT reported.

The Turkish Statistical Institute’s (TUIK’s) latest figures also outline a strong rebound in fixed investment, which increased 6% between April and June. Commerzbank, however, suggested the political unrest in Turkey is “poison for investment decisions”, and said “verifiable international data is pointing in a different direction”.

FDI in the first half of the year fell 8% y/y, IMF data shows, meaning “anyone believing in the official investment boom in Turkey is suggesting that Turkish investors operate along completely different lines than their international colleagues”, Karpowitz reportedly observed.

Secular industrial groups “see strength”
But taking further issue with Commerzbank’s “harsh comments”, Ash noted: “The first quarter GDP print surprised me at first as, like most economists I assumed heightened political risk would subdue domestic demand. However, speaking with economists from local large secular industrial groups - no pro govt bias - they told me they saw strength in exports and domestic demand. Exports were helped by the cheap lira and EU recovery. Domestic demand was helped by the government's successful credit guarantee fund and fiscal loosening which has been plain to see. The second quarter data is much the same story.”

Looking at the doubts over the reported tourism recovery, Ash said he was in Bodrum last week and Istanbul at the weekend and “there was a noticeable pick up in tourism numbers.” He continued: “I spoke with hotel managers, airline execs and shop keepers and they all affirmed the same story. Russians, Arabs, Chinese, Indians are coming in numbers, albeit W Europeans are slow to return but Brits are apparently back in numbers on the Med coast. The base from last year was so low that it is not difficult to see YOY growth, but true I think average spend is down as hotels have cut prices. The tourism sector is not booming, but it is recovering.”

A Turkish government official told the Financial Times that it “is simply not possible” that TUIK’s figures had been politically influenced, while the TUIK described the Commerzbank report as “misleading”.

It reportedly responded: “TurkStat, as the main producer of official statistics and coordinator of the statistical system, produces and disseminates statistics in line with Fundamental Principles of Official Statistics and European Statistics Code of Practice. TurkStat is a scientifically and technically independent institution.”