Decline in real GDP, which was 8.5 percent in the first quarter of 1999, eased in the second quarter and recorded as 2.0 percent. Although, there was a sharp contraction in agricultural value added (-7.8 %), decline in real GDP growth remained moderate in the second quarter of the year due to the slight increase in industrial output and the slowdown of the contraction in services sector. In face of the sharp decline in net factor income from abroad (-50.7 %), contraction in real GNP registered as 3.4 percent in the second quarter of 1999, 1.4 percentage points higher than the decline in real GDP.

.
Growth Rates by Sectors (% change over the same period of previous year )

	January-June		1999
	1998	1999	I.	II.
Agriculture	3,0	-5,5	0,2	-7,8
Industry	5,9	-3,9	-9,3	1,2
Manufacturing	5,8	-4,9	-10,9	0,7
Services	5,7	-5,5	-8,7	-2,6
Construction	0,4	-4,3	-2,3	-5,9
Trade	6,0	-9,4	-15,4	-4,3
Transportation	9,2	-2,0	-3,5	-0,6
GDP	5,6	-5,0	-8,5	-2,0
GNP	6,6	-5,8	-8,4	-3,4

        In the second quarter of 1999, while private gross fixed investments sustained it's serious decline, the fall in private consumption expenditures decelerated and a rise in the public final consumption expenditures was observed.

.
GDP by Expenditures (% change over the same period of previous year )

	January-June		1999
	1998	1999	I.	II.
Private Consumption	3,3	-3,4	-6,7	-0,1
Government Final Consumption Exp.	9,8	3,3	5,0	1,9
Gross Fixed Capital Formation	3,6	-16,0	-18,1	-14,3
Public	9,4	14,7	1,4	22,0
Private	2,6	-21,4	-20,7	-22,0
Change in Stocks (1)	0,9	0,2	-3,4	3,5
Total Domestic Demand	4,6	-6,3	-12,2	-1,0
Exports of Goods&Services	17,6	-9,1	-8,1	-10,0
Imports of Goods&Services	11,5	-11,7	-18,6	-5,2
Net Exports of Goods&Services(1)	0,8	1,6	4,6	-1,1

(1) Contribution to GDP Growth.

        In the second quarter of 1999, exports of goods and services (G&S) and imports of G&S declined by 10.0 and 5.2 percent respectively. Hence, the contribution of net exports to GDP growth registered as negative 1.1 percentage points in this period.

        Available indicators for the months of July and August reveal that the recovery observed in the second quarter of 1999 after the sharp contraction in domestic demand in the first quarter of the year has stopped in the third quarter and that the level of contraction in August has increased compared to the month of July.

        The sales of major consumer durable goods increased by 0.1 percent in the first quarter and 22.1 percent in the second quarter of 1999. But this positive trend halted in the third quarter with the sales showing  8.2  and 11.9 percent declines in July and August respectively.

        Cumulative decrease in sales of automobiles decelerated from 41.5 percent in January-March period of 1999, to 5.2 percent in the second quarter of the year. However, automobile sales declined by 23.7 percent in July and 29,3 percent in August.

.
Indicators of Consumption and Investment Demand (y-o-y % change)

		1999
	1st Quarter	2nd Quarter	July	August
Production of Consumer Durables	3.9	6.0	1.6	-2.9
Sales of Consumer Durables	0.1	22.1	-8.2	-11.9
Imports of Consumption Goods	-24.1	-6.9	-20.1
Sales of Automobiles	-41.5	-5.2	-23.7	-29.3
Number of Vehicle Registration	-44.7	-0.7	-26.3
Gasoline Production	5.7	5.2	-2.5	-21.1
Imports of Investment Goods	-31.9	-24.7	-18.1
Amount of Investment Incentive Certificates	-26.2	115.2	-57.9
Cement production	-1.6	1,4	-8.1	-15.2
Capacity Utilization in Private Manufac. Ind. (%)	66.6	71.0	68.7	64.9
Insufficient Domestic Demand in Private Manufac. Ind. (%) (1)	64.0	59.9	60.5	61.1

(1) The Share of Insufficient Domestic Demand in the Reasons Behind Unused Capacity

.

      Sharp decline in quarterly industrial production index in the first quarter of 1999 ceased in the second quarter of the year, as quarterly industrial production index increased by 0.7 percent in the period, following a 8.6 percent decline in the first quarter. This increase was mainly due to the fact that the contraction in the private manufacturing industry production had lost it's momentum in the second quarter.

     The relative improvement in the second quarter of 1999 was not sustained in the first two months of the third quarter as a matter of fact industrial production diminished by 3.8 percent in July and 13.2 percent in August, the increase in contraction due to the effect of the earthquake. During the month of August sectors of manufacturing, mining and energy faced production decreases of 14.4, 14.1 and 1.0 percent respectively.

    In August all of the sub sectors under manufacturing industry displayed production declines, among these the most prominent decreases were observed in the sub sectors of motor vehicles, petroleum products, chemicals, soil products and food. Industrial and manufacturing production in the January-August period decreased by 5.8 and 6.5 percent respectively compared to the production in the same period of 1998. During this period the most profound declines were observed in the textile, clothing and motor vehicles sectors.

.
Monthly Industrial Production Index ( % change over the same period of previous year)

	January-August		August
	1998	1999	1998	1999
Total	3.6	-5.8	-0.9	-13.2
Mining	14.3	-8.6	2.5	-14.1
Manufacturing	2.5	-6.5	-2.5	-14.4
Food	-1.7	-2.4	-1.6	-13.9
Textile	0.0	-10.2	-5.0	-9.4
Clothing	9.3	-12.8	11.8	-13.8
Petroleum Prod.	3.3	5.7	-0.3	14.7
Chemicals	1.0	-7.3	-9.3	-17.9
Soil Products	6.1	-6.7	3.6	-16.3
Basic metal	1.2	-6.8	2.8	-7.9
Machinery	4.1	-8.7	-21.9	-7.3
Motor Vehicles	4.8	-29.8	-9.9	-25.0
Energy	8.9	2.8	12.1	-1.0

      According to SIS Quarterly Tendency Surveys, capacity utilisation rates in manufacturing  industry registered as 75.5 percent in the second quarter of 1999, after the 70.1 percent rate in the first quarter. Capacity utilisation ratio in the second quarter of 1999 was 0.6 percentage points lower than its level in the same period of last year. The relative improvement experienced in the second quarter of the year was due to the rise in the capacity utilisation rates of basic metals, textile, motor vehicles sectors.

        According to Monthly Tendency Survey, the gradual increase of the capacity utilization ratios since February ceased at the end of June  and hence decreasing capacity utilization ratios in July and August were observed. The average capacity utilisation rate in manufacturing industry reduced to a level of 70.7 percent in August 1999 reaching the lowest rate in the year  which was 79.4 percent  in August 1998.  Capacity utilisation rates  in all the sub sectors in manufacturing industry have been dropped in 1999 August, especially decreases in the sub sectors  food-beverages, textile, clothing and chemistry are dramatic. During the January-August period of 1999 capacity utilisation ratio in the manufacturing industry dropped 4.9 points from it's level in the previous year and realized as 74.2 percent. In this period, textile, machinery and motor vehicle sub sectors have shown the worst decreases in the capacity utilisation rates.

.

.

      According to the monthly data the contraction in the volume of exports has abated in the month of July. As a matter of fact in July, the contraction slowed down to 4.7 percent, after the 5.2 and 7.3 percentage point reductions observed in the first and second quarter of the year respectively.

    On the other hand the contradiction in import growth in the first quarter of 1999, which was 29,5 percent,   has slow downed to 14,5 percent in the second quarter of this year. However, 14,5 percent decrease in imports in July tells us  the contraction in import is still effective.  Hence, the trade deficit narrowed by 65,0 percent and  23,4  percent in the first and second quarters of 1999 continued to narrow by 24,3 percent in July.

.
Foreign Trade (Million Dollar)

	Exports	Imports (CIF)	Trade Deficit
January 1998 1999	2.194 1.864	3.106 2.203	-912 -339
February 1998 1999	2.064 2.160	3.875 2.793	-1.811 -633
March 1998 1999	2.477 2.364	4.364 3.004	-1.886 -640
April 1998 1999	1.917 1.904	3.634 3.328	-1.717 -1.424
May 1998 1999	2.418 2.181	4.175 3.384	-1.757 -1.203
June 1998 1999	2.262 2.030	4.167 3.525	-1.905 -1.495
July 1998 1999	2.209 2.104	4.192 3.606	-1.983 -1.502
January-July 1998 1999 (% Change)	15.541 14.607 -6.0	27.513 21.843 -20.6	-11.971 -7.236 -39.6

      During the January-July period of 1999, exports declined by 6.0 percent and were recorded as 14.6 billion dollars. In this period, exports of agricultural, mining and manufacturing goods declined by 8.8, 10.0 and 5.7 percent respectively.

     During the month of July the decline in the volume of exports was mainly a result of the decrease in exports committed to the non-OECD member countries in Europe. In the particular month, the volume of exports committed to the OECD members increased by 4.6 percent. The decrease in imports in July was basically effected by the 18.9 percent decrease in imports to the OECD members.

     Based on the registration figures of the Union of Exporters, the sharp contraction in export volume has halted in September and a 0.7 percent decline in exports was realised. In sum exports declined by 5.2 percent during the January-September period of 1999. During this period, exports of all sub-groups except forestry products, automotive, dried and fresh fruits, vegetables and floristry declined.

     In the first seven months of 1999, total imports declined by 20.6 percent and registered as 21.8 billion dollars. During this period, imports of consumption, investment and intermediate goods declined by 15.1, 26.1 and 19.9 percent respectively.

    The data on other items of balance of payments are available for the first half of 1999.

    After the current account surplus obtained in the first quarter of the year, there was a deficit in the second quarter, mainly due to the increase in the foreign trade deficit. As a result, the current account balance displayed a deficit of 256 million dollars in the first half of 1999. In 1998, the current account surplus was 1.296 million dollars in the first half of the year.

In the face of the inflows (mostly portfolio investments and short term capital inflows) in March and April the capital account balance displayed a surplus of 2.859 million dollars in the first half of 1999.

     International reserves in the Central Bank increased to 23 billion dollars at the end of September 1999, rising by 3.3 billion from it's 1998 year end level.

.
Current Account Balance (Jan.-June, Million USD)

	1998	1999
Foreign Trade Balance (1)	-7.126	-4.418
Services Balance	3.353	1.567
Services (credit)	10.697	9.109
of which: Tourism Other	2.815 7.882	1.791  7.318
Services (debit)	-7.344	-7.542
Transfer Balance	2.477	2.592
Worker's remittances	2.290	2.379
Current Account Balance	-1.296	- 259

(1) Including shuttle trade and as appeared in the balance of payments.
 

     In August 1999, number of tourist arrivals decreased by 21.8 percent, following a 18.7 percent fall in July. Thus, in the first eight months of 1999, number of tourist arrivals declined by 25.9 percent over the same period of last year.

.
Number of Tourist Arrivals (January-August, Thousands of person)

	1998	1999	% Change
OECD-Europe	3434	2488	-38.0
OECD-Other	419	371	-12.9
Other Europe	790	747	-5.8
CIS Countries	980	715	-37.1
Other	736	730	-0.8
TOTAL	6359	5051	-25.9

.

 
 

.

     In January-August period of 1999, consolidated budget expenditures registered as 17.673 trillion TL, while budget revenues was realised as 10.951 trillion TL. As a result, budget deficit was recorded as 6.722 trillion TL and primary budget yielded a surplus of 856 trillion TL.

.
Consolidated Budget Balance (Jan.-August)

	Trillion TL		% Ch.
	1998	1999	1999/98
Revenues	7.147	10.951	53.2
-Tax Revenues	5.672	8.582	51.3
Expenditures	9.789	17.673	80.5
Non-Interest Exp.	5.312	10.095	90.0
Interest Exp.	4.477	7.578	69.3
Budget Balance	-2.642	-6.722	154.4
Primary Balance	1.836	856

       According to the provisional figures released by the treasury, in cash basis, primary budget deficit was recorded as 134 trillion TL. in September..

     Treasury  has mostly used bond issuing as a financing instrument  during the first nine months of 1999.  In the same period the Treasury has increased  its position of net borrowers in bond market and become a net lender in Treasury bill market. This situation can be observed by examining the structure of  the maturity of domestic borrowing. In fact, maturity of domestic borrowing  rose to 431 days in January-September period of 1999 compared to 230 days in the same period of the last year.

.

 

       Annual interest rates on Treasury's domestic borrowing increased to 116.5 in August from 101.4 percent in July, mainly due to the uncertainties resulting from the earthquake. But, in September interest rates slightly decreased to 113.2 percent. As of January-September period, interest rates on treasury auctions was realised as 111.1 percent in 1999 compared to 105.6 percent a year earlier.

.

.

       At the end of September 1999, net foreign assets of the Central Bank grew by 133.1 over the previous year's end, while net domestic assets declined by 848.3 trillion TL.. During the same period, currency issued and reserve money increased by 40.8 and 50.1 percent respectively.

      As of September 17 1999, growth of M2 and M2Y over the previous year's end registered as 69.6 and 65.1 percent respectively.

      As a result of the rise in borrowing costs and slowdown in the economic activity the growth of credits was lower than the growth of deposits in the first eight months of 1999. Hence, the ratio of credit volume by deposit money banks (excluding agricultural credits) to total deposits (TL+Foreign Exchange Deposits) declined to 41.2 percent in August 1999, from 43.3 percent at the end of 1998.

.
Developments in Monetary Aggregates ⁽¹⁾(End of September 1999, % Change)

	Over August 1999	Over December 1998	Over September 1998
Currency Issued	-2.6	40.8	56.5
Reserve Money	0.4	50.1	70.9
M1	5.5	63.2	67.5
M2	5.5	69.6	104.3
M2Y	5.6	65.1	90.8
Total Deposit	4.7	55.8	93.3
Deposit Money Banks' credits (2)	2.7	31.5	31.3
Memo: Wholesale Price Ind.	3.3	32.3	53.8

(1)  As of September 30, 1999 for currency issued and reserve money, and as of September 17, for other monetary aggregates.
(2) Excluding agricultural credits.
 

       In the Repo-Reverse Repo Market, annual simple interest rates declined to 67.5 percent in August from 82.7 percent level in July. Overnight average interest rate in the Interbank Money Market was recorded as 67.3 percent in September, which was 70.6 percent in August 1999.

      During September the value of exchange basket containing 1$ + 1.5 DM increased by 3.6 percent, while the rise in wholesale price index was 5.9 percent. As of September 1999, Real Exchange Rate Index (1$ + 1.5 DM, 1987=100) was 0.5 percentage points lower than its level at the end of 1998, and 1.8 percentage points lower than its level in September 1998.

.

.

       In September, monthly increase in Wholesale Price Index (WPI) registered as 5.9 percent, 0.6 percentage points higher than a year earlier. Monthly consumer price inflation, on the other hand, fell by 0.7 percentage points over the same month of last year and recorded as 6.0 percent.

.
Price Developments (As of September, % Change)

	WPI-General	Agri.	Public Manuf.	Private Manuf.	CPI
Monthly 1998 1999	5.3 5.9	8.3  6.3	7.5 8.2	3.2 4.7	6.7 6.0
Jan.-Sept.1998 1999	39.8 40.0	49.3 19.0	23.5 76.2	40.3 39.7	48.6 43.8
12 Monthly 1998 1999	65.9 54.4	85.4 37.0	44.2 85.1	64.5 53.0	80.4 64.3
Annu.Ave.1998 1999	80.2 52.4	91.9 51.5	74.7 54.1	77.7 51.6	91.4 66.1

       In September 1999, agricultural sector prices increased by 6.3 percent over previous month, 2.0 percentage points lower than a year earlier.

      Price increases in private manufacturing industry recorded as 4.7 percent which was 1.5 percentage points higher then it's level in September 1998. The acceleration of the price increase in the private manufacturing industry was due to the rises in food, textile, clothing, petroleum products, machinery and equipment and furniture sectors' prices.
Public manufacturing prices on the other hand, rose sharply in September and posted a 8.2 percent increase over a month ago. The acceleration in price increases in public manufacturing sector, resulted from high increases in petroleum products, chemicals, printing and publishing , food and tobacco sub sectors' prices.

          As a result of these developments, increases in WPI registered as 40.0 percent in January-September period 1999, 0.2 percentage points higher than its level in the same period of 1998. In the same period, price increases in private manufacturing industry slightly slowed down to 39.7 percent from 40.3 percent a year earlier. Increases in CPI also decelerated to 43.8 percent in the first nine months of 1999, from 48.6 percent in the same period of 1998.

.

 

      As of September 1999, increases in WPI and CPI, on 12 monthly basis, registered as 54.4 and 64.3 percent respectively, compared to 65.9 and 80.4 percent in the corresponding period of 1998.

.

 

        Similarly, increases in wholesale and consumer prices, on annual average basis, slowed down to 52.4 and 66.1 percent in September 1999, from 80.2 and 91.4 percent in the same period of last year.

.

September 1: By means of the Tax Procedure Law General Notification, due to the earthquake in the Marmara region a declaration on the application of the tax laws in the counties of Kocaeli, Sakarya, Yalova and their districts, Düzce, Gölkaya, Gümüşova, Cumayeri and Çilimli districts of Bolu and in certain regions of Istanbul, Eskişehir and Bursa was announced.

As of September 1 1999, without taking into account of the variable interest rate on foreign credits and the foreign credits under the coverage of exchange rate risks was determined as 75.3 percent for one month by the Central Bank.

September 3: SIS announced that monthly increases in WPI and CPI inflation in August 1999 was realised as 3.3 and 4.2 percent respectively. Annual increase in WPI and CPI registered as 53.1 and 67.1 percent respectively.

September 8: Unemployment Insurance Law was put into force.

September 11: By the amendments on the import regime, new tariffs have been determined for millet.

September 13: 829 trillion TL of Treasury bills with 182 days maturity was sold in an auction. Nominal rates on annual compounded basis were determined as 98.7 percent.

September 14: 859 trillion TL. of Government bonds with 1.064 days maturity, fixed interest rate and quarterly fixed coupon payments was sold in an auction. Nominal rates on annual compounded basis were determined as 125.5 percent.

September 21: 159 trillion TL. of Government bonds with a 546 days maturity, variable interest rate and quarterly fixed coupon payments was sold in an auction. Nominal rates on annual compounded basis were determined as 101.4 percent.