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Corporate Network
Turkey:
the business outlook
For members of the
East European Group
March 2009
Contents
• Executive summary
• Business outlook
• Economic outlook
• Political outlook
• Economic statistics and forecasts
• Market size indicators
Executive summary
• Turkey is already feeling the impact of a deep recession
• Which will likely last through 2010 and will only subside
when developed economies begin to recover
• The lira has seen a steep depreciation, and could fall
further until a deal with the IMF is in place
• Government officials are currently negotiating such a
deal, which will likely be worth more than $25bn
• Nearly a third of respondents to our latest survey say
they still expect sales to grow this year…
• …which is overly optimistic given the current climate
Business outlook – performance benchmarking
• The business outlook in Turkey is grim, though not the
worst in the region
• 32% of firms expect sales to drop this year, and an equal
percentage say sales will grow
• But the median of sales growth forecasts is 0%
• A majority (58%) of firms have experienced more
difficulty collecting receivables in the past three months
• Cost cuts will be relatively modest, given the current
economic turmoil: just over quarter of firms say they will
trim advertising expenditures
• And only a handful have plans to lay-off white collar staff
or delay manufacturing investments
Business outlook – performance benchmarking
• Industrial and healthcare and pharmaceutical firms are
the most optimistic about 2009 – a third of firms in both
sectors expect that sales to grow
• But only 17% of industrial firms expect sales to fall,
compared to 33% of healthcare and pharma companies
• 25% of financial services firms forecast growth, and an
equal percentage expect sale to drop
• FMCG firms are more pessimistic: 50% expect sales to
drop and only 17% expect growth
Economic outlook – growth outlook
• Growth in Turkey has disappeared, like in the rest of the
world
• Demand for exports, credit squeeze, rebalancing of
corporate balance sheets, decline in currency value and
overall business confidence, and large payments to
creditors are all dragging growth down
• Turkey will most likely end up in a recession in both
2009 and 2010
• Turkey will not be able to recover “on its own”
• Its dependency on foreign demand and foreign cash is
sizeable
• Turkey will be able to recover only when there is
recovery in its main export markets
Economic outlook – currency (1)
• The main problems for the lira are:
– sizeable payments due in 2009 that exceed forex
reserves
– large inflows of speculative hot money that leaves
when times are bad
– delays and uncertainty regarding the IMF stand-by
agreement
– a history of currency volatility and too much strength
gained when global economy was good
Economic outlook – currency (2)
• With all these factors in play, the lira lost significant
value and the risks in the short term are still on the
downside
• The currency should show signs of relative stability once
the IMF deal (which is necessary) is in place
• If the government decides to go without the IMF, there
will be more currency weakness and on-going problems
to finance the large payments in 2009 and 2010
Economic outlook – external sector
• The Turkish government has improved a number of
fundamentals since it has been in power
• But Turkey still carries sizeable debt repayments from
previous years and such payments will be sizeable in the
next few years
• In other words, Turkey still needs time to grow out of its
old debt problem
• Also, short-term debt payments in 2009 and 2010 are
high relative to the size of reserves
• The IMF deal, if it is signed soon, will probably exceed
$25bn
Political outlook
•
The Constitutional Court's decision in 2008 not to close
the ruling Justice and Development Party (AKP)
removed only some political uncertainty
•
An ongoing investigation of an ultranationalist gang,
comprised of high-ranking military officials, accused of
trying to bring down the government, could damage
fragile relations between the government and military
•
And the government has left itself open to criticism for
making only limited progress in key policy areas...
•
...including on reforms required for EU membership,
which appear to have been put on hold until after the
local elections, scheduled to take place later this month
Key economic indicators
2009
2010
-2.5% to -4.5%
0.0% to -2.0%
-3
-2.7
7.8
7.4
Exchange rate LCU:euro (end-period)
2.50
2.60
Money market interest rate (%)
13.5
13
11
11.6
-3.4
-3.6
Financing requirement (US$bn)
-115.5
-113.59
Current account balance (US$bn)
-20.14
-24.41
Medium- & long-term repayments due (US$bn)
-50.73
-52.27
Short-term debt due (US$bn)
-44.62
-36.9
60.65
60.75
46.4
42.6
220.02
222.04
40.3
39.6
GDP (% real change pa)
Budget balance (% of GDP)
Consumer prices (% change pa; av)
Recorded unemployment (%)
Current account balance/GDP
Foreign-exchange reserves (US$bn)
Total debt/GDP (%)
Total medium- & long-term debt (US$bn)
Public debt (% of GDP)
These slides and
others in the series
provide a range of
estimates on GDP
outlook. We feel that a
scenario/range is the
only sensible way
forward in planning for
these and other
markets globally.
However, we would
underscore that we
sense that the risk is
always on the
downside of the range
we provide.
Market size indicators
2009
2013
Population (million)
72.61
75.38
Nominal GDP (US$bn)
931.0
1158.1
12,820
15,360
Private consumption per head (US$)
6,030
9,250
Total imports (US$bn)
150.3
217.5
Private consumption (% of GDP)
72.9
71.9
Government consumption (% of GDP)
13.7
14.1
Gross fixed investment (% of GDP)
18.1
16.7
GDP per head (US$ at PPP)
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