One economic term that recurrently pops up in the media is Gross Domestic Product (GDP). What, then, is GDP? And what can we say about the economic performance of Turkey looking at the growth rate of her GDP?
Gross Domestic Product is the name economists give to the aggregated monetary value of all the final goods and services a country produces within its borders within a calendar year. Economists also differentiate between nominal and real GDP.
To summarise, nominal GDP presents the aggregate monetary value of all the final goods and services produced in a country in a given year using the current prices of those commodities in that year. Real GDP, on the other hand, is calculated by using the prices of an index year and generally used to compare the performance of an economy across different years (all indexed to the same year). In other words, using the real GDP values makes it possible for economists to discount the effects of price inflation (or deflation) over the nominal GDP.
In studying the economic performance of a country in a historical perspective, one statistical series that we can refer to is the GDP growth rate of that country. GDP growth rate can be calculated in different ways depending on the time intervals between observations. With the yearly series, the growth rate is calculated with respect to the previous year. With the quarterly series, on the other hand, it can either be calculated with respect to the previous quarter or with respect to the same quarter of the previous year. Since neglecting the seasonal effects on production levels may be misleading, economists prefer to compare winter months with winter months, spring months with spring months and so on.
Table 1 tracks the real GDP growth rate from 1969 to 2006 (indexed at 1987 prices) with yearly observations. In a narrower time frame albeit with quarterly observations, Table 2 tracks the real GDP growth rate from the first quarter of 1999 to the second quarter of 2015. In Table 2, following the convention among economists, we used the growth rates that are calculated with respect to the same quarter of the previous year.
The historical series in Table 1 enables us to observe the periods of economic contraction that Turkey experienced in its recent past. For instance, it is possible to observe how the negative growth rates (i.e., contraction) in 1979 and 1980 may have contributed to the context that paved the way towards the Military Coup of 1980. Similarly, the negative growth rate in 2001 is an indicator of the economic crisis that led to the so-called Kemal Derviş reforms.
Needless to note, compared to yearly observations, with quarterly observations economists can make subtler observations. Looking at Table 2, we can track the effects of the 2 major economic crises through the first decade of 2000s rather clearly. Note the negative growth rates in 2001 as well as in 2008-2009.
Sources:
GDP dataset is downloaded from the website of Turkish Statistical Institute, “Gross Domestic Product by Production Approach” link.
Statistical Tables: “Seasonal and Calendar Adjusted Gross Domestic Product; at 1998 Constant Prices” and “Gross Domestic Product by Kind of Economic Activity [1987 at constant prices]”
Image: Nalan Yırtmaç
