Tag: Turkish economy

Breaking….S&P downgrades Turkey’s outlook

Breaking….S&P downgrades Turkey’s outlook.

Just in from S&P:

‘Standard & Poor’s Ratings Services today revised the outlook on Turkey’s long-term foreign and local currency sovereign credit ratings to stable, from positive. At the same time, we affirmed our ‘BB/B’ foreign currency and ‘BBB-/A-3′ local currency long- and short-term sovereign credit ratings on Turkey. We also affirmed the Turkey long- and short-term national scale ratings at ‘trAA+/trA-1′. The ’3′ recovery rating and ‘BBB–’ transfer and convertibility (T&C) assessment remain unchanged.

Less-buoyant external demand and worsening terms of trade (the price of exports compared to imports) have, in our view, made economic rebalancing more difficult, and have increased the risks to Turkey’s creditworthiness given its high external debt and the state budget’s reliance on indirect tax revenues. We have revised the outlook on Turkey’s long-term sovereign credit ratings to stable from positive, reflecting our view that the ratings are likely to remain at the current level during the next 12 months.’

Ah yes, that’ll be those Erdaganomics again, then. You read it here first.

via Breaking….S&P downgrades Turkey’s outlook. | A diary of deception and distortion.

May 2, 2012
Turkey enjoying decade-long economic boom

Turkey enjoying decade-long economic boom
By The Economist

But ominous signs of a crash prevail

A shopper enters a store in Istanbul. Cheap money in the rich world has allowed Turkey to dodge an immediate crisis. And if liquidity remains plentiful, the country may continue to skirt trouble for some time. (CP)

Compared with the mess that many rich countries are in, most emerging economies seem in pretty good shape.

To be sure, plenty saw their growth rates slow sharply last year. And as fears over the euro’s future escalated, some currencies and stock markets slumped.

But apart from the poorest places that habitually rely on the International Monetary Fund’s subsidized help, only a handful of emerging economies, mainly in Eastern Europe, have had to turn to it for funds.

This resilience is impressive. But it would be a mistake to assume it will last for ever.

For even as rich-world investors pile back into emerging market funds, a quick glance at these countries’ vital statistics suggests that plenty of places have a problem or two. India has a big budget deficit. Several countries, from Venezuela to Vietnam, have double-digit inflation. South Africa has a sizeable current-account deficit.

But based on the standard warning signs of trouble — from rapid credit growth and high inflation to a big external deficit — one country stands out.

It is Turkey.

For the past decade, Turkey has enjoyed a spectacular boom, fuelled by equally spectacular foreign borrowing. The economy grew by 8.5 per cent last year, driven by credit that at one point was surging at an annual pace of more than 40 per cent. Foreigners lent much of the cash.

Turkey’s current-account deficit exceeded 10 per cent of gross domestic product, more than twice as much as any of the emerging markets regularly tracked by The Economist.

This turbocharged growth slowed sharply at the end of last year, as investors’ jitters and a sharp fall in the Turkish lira forced the central bank to tighten monetary policy. Figures released on April 2 showed that annual GDP growth slowed to 5.2 per cent in the fourth quarter of 2011, and initial evidence suggests a further deceleration this year.

Unfortunately, the imbalances remain. Even with much slower growth, inflation is above 10 per cent and the current-account deficit is likely to stay around eight per cent of GDP.

With little foreign direct investment, most of that deficit will need to be funded by flighty bond and bank finance. Turkey, in short, has not just overheated. It has a growing competitiveness problem and a dangerous addiction to the riskiest types of foreign capital.

For now, foreigners seem unworried. The lira has strengthened, and the Istanbul stock market is up by 20 per cent since the start of the year.

But the apparent revival of capital inflows probably has less to do with confidence in Turkey’s economy than the largesse of rich-world central banks, particularly the European Central Bank’s massive provision of liquidity.

Cheap money in the rich world has allowed Turkey to dodge an immediate crisis. And if liquidity remains plentiful, the country may continue to skirt trouble for some time.

But eventually, on today’s course, the danger of some kind of crash is worryingly large.

To lessen that danger, Turkey needs to boost its savings and improve its competitiveness. With its private sector addicted to spending on foreigners’ dimes, Turkey’s government needs to compensate by saving more.

In fact, the opposite has been happening. Although Turkey’s fiscal position is healthy compared with those of other emerging economies, the tax take has been flattered by the unsustainable import boom. Adjust for these transient revenues and the IMF calculates that Turkey’s underlying budget balance, before interest payments, has shifted from a surplus of around five per cent of GDP between 2003 and 2006 to a deficit now.

Tighter fiscal policy would help reduce the current-account deficit. But it will not be enough. A lasting improvement in Turkey’s external accounts demands structural reforms to boost competitiveness and improve the flexibility of its workers. It is a puzzle that, for all its booming growth, Turkey does not attract more foreign direct investment.

One reason may be its labour laws, which in many ways look like those of a rigid southern European economy. Another obstacle to investment is a thicket of regulations. Turkey ranks 71st in the World Bank’s Doing Business league tables, better than Greece but worse than Kazakhstan.

These kinds of reforms will take time, so it is essential that Turkey’s leaders start now, even if low interest rates in the rich world keep the foreign money flooding in. The trouble is that most of those leaders do not recognize the urgency.

via Turkey enjoying decade-long economic boom | The Chronicle Herald.

April 14, 2012
Turkish advertising: boom or bubble?

by Daniel Dombey

If you want to see what a booming economy is like, look up at an Istanbul billboard. Like Turkey as a whole, the city is brimful with publicity – for luxury housing developments, flights across the world and the latest Apple products.

But in an uncertain 2012, there are signs that the advertising bonanza – which is still modest by standards elsewhere – may not expand so quickly in future.

According to the Turkish Association of Advertising Agencies, the country’s media advertising market is set to grow 15 per cent this year over last year’s total of TL4.3bn ($2.4bn). That’s after growth rates of 20 and 31 per cent for 2011 and 2010 respectively.

Over 55 per cent of all advertising in Turkey is on television with the press representing 24.5 per cent, the internet 8 per cent and the omnipresent billboards 7 per cent.

The Association of Advertising Agencies describes its prediction for this year as “optimistic” and – showing it is unafraid to state the obvious – points out that overall growth and Turkey’s high level of economic activity are the real drivers of the country’s advertising. Of course, the consumer boom that has helped stoke growth of more than 8 per cent in recent years has everything to do with Turkey’s aspirational adverts.

Things are finely balanced however. The Turkish central bank said on Wednesday that it expected that the economy would easily meet the government’s 4 per cent growth target for this year, despite a marked slowdown in economic activity at the start of the year which may see growth flat for the first quarter.

The big risk is in the oil price, which is particularly skittish because of the tensions over Iran’s nuclear programme and to which Turkey, as a large scale energy importer, is particularly vulnerable. A big jump could stoke inflation that is already above 10 per cent a year, leading to higher interest rates, with all that means for economic activity – and indeed Turkey’s spate of ever slicker ads.

via Turkish advertising: boom or bubble? | beyondbrics | News and views on emerging markets from the Financial Times – FT.com.

March 8, 2012
Turkey: the key to Europe’s future :

The EU is Turkey’s number one trade partner, with Turkish exports and imports between 46 to 39 percent. Foreign direct investment inflows to Turkey amounted to €10 Billion in 2008, while Turkish direct investments in more than 50 countries amounted to €1.7 billion, said Turkish Chief Negotiator and Minister for European Union Affairs, Egeman Bagis, in Munich last month.

Turkey is the key to Europe’s future. Turkey has a unique strategic position in its region for geographical, cultural, and historical reasons. It is the most Eastern part of the West and the most Western part of the East.

Minister Bagis also sees Turkey as an active player and mediator in critical areas such as the Middle East, South Caucasus, Central Asia, the Black Sea basin, the Mediteranean, and the Balkans. When asked by Alison Smale, Executive Editor of the International Herald Tribune, he said, “Turkey is the only country to apply for a Schengen visa. That Turkey will join the EU is a 60 percent issue.”

With Europe on one side and Asia on the other side, Turkish investors are looking more into the Central Asia region and its 1.4 billion consumers, than to Europe.

Established and very well connected, Turkish hotel investors, construction companies, and developers have been heading to Central Asia for years, building partnerships with neighbor countries in the south – Georgia, Armenia, Azerbaijan, Syria, Iraq, and Iran – at the bottom line.

The country – straddling the continents of Europe and Asia – is a promising market, with Istanbul as one of the world’s hottest destinations and one the hippest cities. Istanbul’s sights and sounds are beyond compare, believes Romain Avril, Vice President of Business Development for Rezidor. He sees a big potential in mid-market hotels. Why is that? Lack of competition, low cost of operation, quick turnaround, and simpler development and construction procedures makes Istanbul, Turkey very attractive segments to move business to.

Until now, Radisson Blue has four properties in operation (Istanbul Bospherus, Istanbul Airport, Ankara, and Cesme), and four new hotels are under development in Istanbul Asia, Istanbul Sisli, and Istanbul Golden Horn, with more to come. Envisioning 5-6 Park Inns by Radisson hotels (maybe as part of a joint venture) in Istanbul city, with another 10-20 hotels in the pipeline in other cities, such as Izmir, Mersin, Bursa, etc., makes Radisson more or less a local player with strong Turkish partners.

“The outlook of the Turkish tourism industry is more buoyant than ever, with an increasing number of international and local hotel companies investing in the sector,” said Jonathan Worsley, Chairman of Bench Events, co-organizer of the Central Asia and Turkey Hotel Investment Conference (CATHIC), to be held in Istanbul from February 6-8, 2012.

It is the ideal time to invest in Turkey’s hospitality sector with international tourist arrivals expected to reach 33 million by 2012. Indeed, more than 1.4 million Arab visitors are recorded so far this year.

The conference program includes speakers with knowledge and expertise in regional and international hotel development, finance, hotel branding and operations, plus sessions giving perspectives from industry analysts.

Among key speakers of CATHIC 2012 is Cevdet Akcay, Chief Economist;Yapi Kredi Bank; Denis Hennequin, President & CEO, ACCOR SA; Eric Danziger, President & Chief Executive Officer, Wyndham Hotel Group; Kurt Ritter, President & CEO, The Rezidor Hotel Group; Atilla Ozturk, CEO & Board Member, ASTAY; Serdar Bilgili, Chairman, Bilgili Holding; and Roland Vos, President, EAME, Starwood Hotels & Resorts Worldwide, just to name a few.

Meanwhile, Mehmet Önkal, Managing Partner, BDO Hospitality Consulting in Turkey, warned that investment in the sector is crucial. “One of the key drivers of sustainable development is the consistent flow of investment, and Turkey is lucky, as it does not face the same challenges with financing as other markets.” he said.

And last but not least, Turkey’s tourism industry has also benefitted from ongoing unrest in Egypt and the North Africa region. Among Turkey’s visitors were a number of newcomers – Arab tourists, for instance, who used to travel to Syria and nearby, are discovering Istanbul – strongly attracted by the wide array of mosques and similar hospitality.

With more and more arrivals coming from the UK, the ABTA Travel Convention is returning to Turkey this year in October. The last time Turkey hosted the ABTA Travel Convention was in 1996 in Istanbul. At that time, the country had just over 750,000 arrivals from the UK, which today is closer to 3million.

Turkey has also launched Istanbul’s bid to host the 2020 Olympic Games. In support of that, Istanbul is hoping to strengthen the bid as the 2012 European Capital of Sports. Events highlighted will include the IAAF World Indoor Championships in Athletics (March 9-12, 2012), which is likely to be the final opportunity to see athletes competing on an international level prior to the London Summer Olympics 2012.

Sources: ETurboNews

Researcher: Ingrid Lo

via Turkey: the key to Europe’s future :.

March 1, 2012
Three Economic Lessons Imported From Turkey

By Rana Foroohar

I just returned from a week in Istanbul, where I was reporting a piece on what Turkey’s burgeoning contemporary art scene tells us about where the country is headed politically (you can look for that in our upcoming style and design special in the magazine later this month). But I also learned a few economic lessons that have particular relevance to the U.S. and global economy right now.

1. Manufacturing matters. In Istanbul, I met up with Ersin Akarlilar, the CEO of Mavi Jeans. If you aren’t already wearing Mavi, your kids probably are – the company sells hundreds of millions of dollars worth of high end, slim fitting denim all over the world. Building a global luxury brand is tough, especially for an emerging market firm that doesn’t have the cache of European heritage. But Mavi has managed to do it, in part because they kept an ownership stake in their factories, which allows them to have enough supply chain flexibility to respond quickly to market trends. “If Nordstrom calls and says they want 10,000 pairs of jeans in department stores within a month, you’d better have factories that can produce and ship them quickly enough,” says Akarlilar. Otherwise, the retailer will move on to the next hot brand that can. If Mavi had outsourced production to Asia, where labor is half the price it is in Turkey, they wouldn’t have been able to get the product to market on time or on budget. But since they kept what’s known in the trade as a “vertically integrated supply chain” (meaning, production, marketing, and sales are done in the same place) they’ve managed to thrive, and are now worn by the likes of Kate Winslet and Chelsea Clinton.

(MORE: Euro Banks Swap Cash for Trash)

2. There’s no such thing as decoupling. There’s a lot of talk in the global economy right now about how emerging markets don’t need the West. It’s just not true. As Mavi and many other firms in Turkey pointed out to me, despite government efforts to diversify into new regional markets, Europe still represents over half the country’s trade, and it’s an even bigger chunk of the market for many countries in the Middle East and North Africa. Europe is even China’s number one trading partner. What happens in the West is felt by the East, and visa versa. That’s one big reason we’ll see an across the board slowing of emerging market growth this year.

3. Political risk is under-rated as a driver of the global economy. Turkey has been in the news a lot this year because Prime Minister Recip Erdogan has emerged as a regional leader in the post Arab Spring world. But a little over a year ago, nobody could have predicted Arab spring. Meanwhile, France’s vicious rejection of Turkey’s EU bid has helped turn the country, which for years had been Westward facing, in a new direction. It’s not just the Middle East that’s facing major political change – China will have a new leadership in 2012. There are elections coming not only in the U.S., but also in France, and in Brazil. Four seats on the U.N Security Council will change over this year, too. It’s time to start thinking about political risk again when calculating global economic growth. There will be a lot of the former this year – how much of the latter remains to be seen.

via Three Economic Lessons Imported From Turkey | Business | TIME.com.

February 10, 2012
Number one trade partner in EU is Turkey Turkey: the key to Europe’s future

By Elisabeth Lang, eTN | Feb 05, 2012

(eTN) – The EU is Turkey’s number one trade partner, with Turkish exports and imports between 46 to 39 percent. Foreign direct investment inflows to Turkey amounted to €10 Billion in 2008, while Turkish direct investments in more than 50 countries amounted to €1.7 billion, said Turkish Chief Negotiator and Minister for European Union Affairs, Egeman Bagis, in Munich last month.

Turkey is the key to Europe’s future. Turkey has a unique strategic position in its region for geographical, cultural, and historical reasons. It is the most Eastern part of the West and the most Western part of the East.

Minister Bagis also sees Turkey as an active player and mediator in critical areas such as the Middle East, South Caucasus, Central Asia, the Black Sea basin, the Mediteranean, and the Balkans. When asked by Alison Smale, Executive Editor of the International Herald Tribune, he said, “Turkey is the only country to apply for a Schengen visa. That Turkey will join the EU is a 60 percent issue.”

With Europe on one side and Asia on the other side, Turkish investors are looking more into the Central Asia region and its 1.4 billion consumers, than to Europe.

Established and very well connected, Turkish hotel investors, construction companies, and developers have been heading to Central Asia for years, building partnerships with neighbor countries in the south – Georgia, Armenia, Azerbaijan, Syria, Iraq, and Iran – at the bottom line.

The country – straddling the continents of Europe and Asia – is a promising market, with Istanbul as one of the world’s hottest destinations and one the hippest cities. Istanbul’s sights and sounds are beyond compare, believes Romain Avril, Vice President of Business Development for Rezidor. He sees a big potential in mid-market hotels. Why is that? Lack of competition, low cost of operation, quick turnaround, and simpler development and construction procedures makes Istanbul, Turkey very attractive segments to move business to.

Until now, Radisson Blue has four properties in operation (Istanbul Bospherus, Istanbul Airport, Ankara, and Cesme), and four new hotels are under development in Istanbul Asia, Istanbul Sisli, and Istanbul Golden Horn, with more to come. Envisioning 5-6 Park Inns by Radisson hotels (maybe as part of a joint venture) in Istanbul city, with another 10-20 hotels in the pipeline in other cities, such as Izmir, Mersin, Bursa, etc., makes Radisson more or less a local player with strong Turkish partners.

“The outlook of the Turkish tourism industry is more buoyant than ever, with an increasing number of international and local hotel companies investing in the sector,” said Jonathan Worsley, Chairman of Bench Events, co-organizer of the Central Asia and Turkey Hotel Investment Conference (CATHIC), to be held in Istanbul from February 6-8, 2012.

It is the ideal time to invest in Turkey’s hospitality sector with international tourist arrivals expected to reach 33 million by 2012. Indeed, more than 1.4 million Arab visitors are recorded so far this year.

The conference program includes speakers with knowledge and expertise in regional and international hotel development, finance, hotel branding and operations, plus sessions giving perspectives from industry analysts.

Among key speakers of CATHIC 2012 is Cevdet Akcay, Chief Economist;Yapi Kredi Bank; Denis Hennequin, President & CEO, ACCOR SA; Eric Danziger, President & Chief Executive Officer, Wyndham Hotel Group; Kurt Ritter, President & CEO, The Rezidor Hotel Group; Atilla Ozturk, CEO & Board Member, ASTAY; Serdar Bilgili, Chairman, Bilgili Holding; and Roland Vos, President, EAME, Starwood Hotels & Resorts Worldwide, just to name a few.

Meanwhile, Mehmet Önkal, Managing Partner, BDO Hospitality Consulting in Turkey, warned that investment in the sector is crucial. “One of the key drivers of sustainable development is the consistent flow of investment, and Turkey is lucky, as it does not face the same challenges with financing as other markets.” he said.

And last but not least, Turkey’s tourism industry has also benefitted from ongoing unrest in Egypt and the North Africa region. Among Turkey’s visitors were a number of newcomers – Arab tourists, for instance, who used to travel to Syria and nearby, are discovering Istanbul – strongly attracted by the wide array of mosques and similar hospitality.

With more and more arrivals coming from the UK, the ABTA Travel Convention is returning to Turkey this year in October. The last time Turkey hosted the ABTA Travel Convention was in 1996 in Istanbul. At that time, the country had just over 750,000 arrivals from the UK, which today is closer to 3million.

Turkey has also launched Istanbul’s bid to host the 2020 Olympic Games. In support of that, Istanbul is hoping to strengthen the bid as the 2012 European Capital of Sports. Events highlighted will include the IAAF World Indoor Championships in Athletics (March 9-12, 2012), which is likely to be the final opportunity to see athletes competing on an international level prior to the London Summer Olympics 2012.

via Number one trade partner in EU is Turkey Turkey: the key to Europe’s future – eTurboNews.com.

February 7, 2012