Türkiye Panoraması

After a decade of well-implemented reforms and high growth rates, the Turkish economy seems to be struggling to maintain the same growth performance. Coface expects a growth rate of 3.5% this year - still a solid rate, yet below the potential growth rate estimated at 5% and lower than some of the country’s peers. The recovery in the US economy and the Federal Reserve exit strategy have pushed the global economy into a new era. Emerging countries face new challenges due to less available liquidity and structural vulnerabilities. Over the period ahead, the high volatility of the Turkish lira, the recovering but still-fragile growth in Europe and geopolitical risks weighing on the top export markets, are considered as the main challenges for the Turkish economy. Coupled with the general elections in June 2015, these factors are leading to a slowdown in household consumption and investment expenditure.

The textile and clothing sectors are among the most impacted by the developments in the global economy. Regional tensions are also weighing on the export performance of Turkish textile and clothing companies. Coface has increased the textile sector risk assessment to high risk level from medium risk, mainly due to the restrictive impact of the euro’s strengthening on export revenues, increasing import and production costs, the fragile recovery in the core market of Europe, losses recorded in Ukraine and Russia and finally deterioration in companies’ payment performance. The clothing sector currently stands at medium risk level, but is being closely monitored. The pharmaceutical sector remains solid, despite heavy regulations and lower profit margins. Coface evaluates the risk level of this sector as low. The sector is benefitting from the greater access of Turkish
citizens to healthcare services, higher per capita income and higher pharmaceutical expenditure per capita. Although the reference pricing system puts pressure on prices, which in turn restrains investments in new tech-nologies, the sector still has the strong foundations necessary for
steady financial performance. Payment collection is steady, as no delays have been detected in State payments.

The Turkish economy recorded a growth rate of 2.9% in 2014 -, below the government end-2014 forecast of 3.3%. Household expenditure contributed 0.9 percentage points (pp) to the growth rate during the period, declining from 3.4 pp in 2013. As household consumption accounts for around 65% of total output, this decline in pace pushed down the country’s growth rate from the 4.2% achieved in 2013.The main reasons behind this slower momentum in household expenditure were the macroprudential tools implemented by the Turkish banking watchdog (BDDK) at the beginning of 2014, in order to curb
domestic demand and narrow the current account deficit. These tools limited the number of installments for some goods and imposed higher down payments for auto loans. As a result, the pace of growth of consumer loans declined to 13.7% yoy in 2014, from 28% in 2013. Turkish consumers usually tend to finance their consumption expenditures through consumer loans or credit cards. Between 1994-2013, real wages rose by only 0.9% in the private sector, while they declined by 14.2% in the public sector. Households thus have tendency to use loans to finance their needs. This situation increased the ratio of household debt to disposable income to 55% in 2013, from 7.5% in 2003. The high volatility of the lira also weighing on consumer behavior, as Turkish people consider the progressive depreciation of the lira as an economic warning sign ( because of their experience during the beginning of the 2000s when they became poorer overnight following the violent economic crisis.