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Updated scenarios
In 2014 Turkey has been affected externally by the FED and internally by an important political crisis. This environment has made it difficult for actors inside Turkey to take decisions.
Capital asked representatives of the real sector to give their forecasts for 2014 in the light of these developments. It was striking that each had a good scenario and a bad scenario.
But all of the representatives of the real sector were uncomfortable with the uncertainty and were looking for “urgent stability” in order to be able to make medium-term plans. Here are the sectors’ scenarios for 2014
Click images to see the tables.
CONSTRUCTION EXPOSED TO EXTERNAL FACTORS
It looks as if construction, which has been the motor of Turkey’s economic growth in recent years, will be the sector to be most affected by global and domestic developments in 2014, Dumankaya İnşaat Board Chair Uğur Dumankaya says:
“The FED’s decision to reduce its purchases of bonds, the fluctuations in interest rates, the political instability and, as a result of these, a continuing rise in foreign exchange resulting in an increase in construction costs are the leading factors that would play a role in a negative scenario for the sector.
The worst case scenario for the sector would be if all of these factors came together, which could result in a contraction of around 20 per cent in 2014.” But Dumankaya adds that, boosted by the urban renewal program, things could also be brighter.~
He thinks that in a good scenario the construction sector could grow by at least 5 percent in 2014 and adds: “There are approximately 300-400,000 housing renewal projects in Istanbul alone. There are 6.5 million homes at risk in Turkey as a whole.
THERE IS NO GOOD SCENARIO IN AUTOMOTIVES
The automotive sector is, like construction, negative about 2014 because of external factors... Toyota Marketing and Sales CEO Ali Haydar Bozkurt summarizes the situation as follows: “The automotive sector closed 2013 with sales of 853,000 vehicles.
But the sudden rise in the foreign exchange rate in the last months of the year, the increase in the rates of the Special Consumption Tax and the new regulations introduced by the Banking Regulatory and Supervisory Agency mean that we are forecasting a decline of around 20-30 percent in 2014 compared with last year. Our forecast is that, under the current conditions, this will result in a total market of 600-650,000 vehicles.”
Bozkurt believes that the current economic indicators and the taxes mean that the bad scenario is more likely to occur. “It is not possible to see a good scenario when one looks at the current picture,” he says.
“The best case scenario would be if the exchange rates returned to where they were six months ago and, even in this situation, the increase in the Special Consumption Tax and the decisions by the Banking Regulatory and Supervisory Agency would still produce an average contraction in the market of 5 percent. Even in the good scenario, we don’t see it as being a record year for the automotive market.”
THE FUEL SECTOR WANTS STABILITY
The fuel sector is one of the sectors that is expecting a low rate of growth. Starpet Deputy Board Chair Murat Okalin thinks that in the best case scenario the fuel sector will grow by 8 per cent in 2014 and in the worst case scenario it will grow by 4 per cent.~
“We can list the factors that would have a positive impact on the market, and that are necessary for the best scenario to be realized, as economic stability, no price hikes, an increase in consumption and, in addition to developments in market conditions, the taking of successful measures against fuel smuggling.
But, unfortunately, I see the bad scenario as more likely,” he says. Okalin lists the factors likely to result in the bad scenario as economic instability, an increase in the foreign exchange rates driving up prices and, as a result of this, a fall in consumption, an increase in transportation costs and a market that does not develop.
Okalin explains why he is pessimistic as follows: “Investment and employment will decline during a process where there is an increase in uncertainty and instability. It is really difficult at the moment to see what 2015 will be like. The primary reasons for this uncertainty include the political situation, the forthcoming elections, the turmoil in the Middle East and battles over interests.”
INFORMATION TECHNOLOGY IS MORE HOPEFUL
There are also sectors which can look at the current uncertainty hopefully. One of them is the information technology sector. Index Group CEO Erol Bilecik says that, as a sector which is linked to foreign exchange, the information technology sector in Turkey may grow or contract by 10 percent in 2014 depending on the political uncertainty and changes in the foreign exchange rates.
But he explains why he is still hopeful of growth as follows: “The IT sector in Turkey is a sector which is relatively more independent from any kind of development in the economy as a whole and it tends to be one which grows anyway.
Especially the young population and the demand that results from the need for IT in education, entertainment and business life mean that it is one of the sectors that is less affected by these kinds of crises.~
I believe that the current negative economic conditions in Turkey and the sudden rise in the exchange rates have had an impact. But we predict that all sectors will recover quickly in the second half of 2014. I can say that 2015 promises to be much better.”
CLOTHING IS EXPECTING 10 PERCENT
The players in the clothing sector are expecting the sector to grow again in 2014 as a result of the significant momentum in retailing. Kiğılı CEO Hilal Suerdem says that, despite expectations of problems on the clothing market, 2013 went well for them and that they are expecting turnover to increase for 10 more years.
“Our forecast for a bad scenario is growth of 7 percent,” says Suerdem, and gives the reasons why he is expecting 10 per cent growth as follows: “We are used to the problems that may arise in 2014. There are currently 335 shopping malls and we are expecting another 30.
As the number of shopping malls grows, so do brands. The increases in turnover and the growth rate may be even higher. One of the targets for 2014 and 2015 is to have a presence in the shopping malls that are being built. Despite the election atmosphere and the political turbulence, we shall grow as Turkish retailers both domestically and abroad.”
But all of the representatives of the real sector were uncomfortable with the uncertainty and were looking for “urgent stability” in order to be able to make medium-term plans. Here are the sectors’ scenarios for 2014
Click images to see the tables.
CONSTRUCTION EXPOSED TO EXTERNAL FACTORS
It looks as if construction, which has been the motor of Turkey’s economic growth in recent years, will be the sector to be most affected by global and domestic developments in 2014, Dumankaya İnşaat Board Chair Uğur Dumankaya says:
“The FED’s decision to reduce its purchases of bonds, the fluctuations in interest rates, the political instability and, as a result of these, a continuing rise in foreign exchange resulting in an increase in construction costs are the leading factors that would play a role in a negative scenario for the sector.
The worst case scenario for the sector would be if all of these factors came together, which could result in a contraction of around 20 per cent in 2014.” But Dumankaya adds that, boosted by the urban renewal program, things could also be brighter.~
He thinks that in a good scenario the construction sector could grow by at least 5 percent in 2014 and adds: “There are approximately 300-400,000 housing renewal projects in Istanbul alone. There are 6.5 million homes at risk in Turkey as a whole.
THERE IS NO GOOD SCENARIO IN AUTOMOTIVES
The automotive sector is, like construction, negative about 2014 because of external factors... Toyota Marketing and Sales CEO Ali Haydar Bozkurt summarizes the situation as follows: “The automotive sector closed 2013 with sales of 853,000 vehicles.
But the sudden rise in the foreign exchange rate in the last months of the year, the increase in the rates of the Special Consumption Tax and the new regulations introduced by the Banking Regulatory and Supervisory Agency mean that we are forecasting a decline of around 20-30 percent in 2014 compared with last year. Our forecast is that, under the current conditions, this will result in a total market of 600-650,000 vehicles.”
Bozkurt believes that the current economic indicators and the taxes mean that the bad scenario is more likely to occur. “It is not possible to see a good scenario when one looks at the current picture,” he says.
“The best case scenario would be if the exchange rates returned to where they were six months ago and, even in this situation, the increase in the Special Consumption Tax and the decisions by the Banking Regulatory and Supervisory Agency would still produce an average contraction in the market of 5 percent. Even in the good scenario, we don’t see it as being a record year for the automotive market.”
THE FUEL SECTOR WANTS STABILITY
The fuel sector is one of the sectors that is expecting a low rate of growth. Starpet Deputy Board Chair Murat Okalin thinks that in the best case scenario the fuel sector will grow by 8 per cent in 2014 and in the worst case scenario it will grow by 4 per cent.~
“We can list the factors that would have a positive impact on the market, and that are necessary for the best scenario to be realized, as economic stability, no price hikes, an increase in consumption and, in addition to developments in market conditions, the taking of successful measures against fuel smuggling.
But, unfortunately, I see the bad scenario as more likely,” he says. Okalin lists the factors likely to result in the bad scenario as economic instability, an increase in the foreign exchange rates driving up prices and, as a result of this, a fall in consumption, an increase in transportation costs and a market that does not develop.
Okalin explains why he is pessimistic as follows: “Investment and employment will decline during a process where there is an increase in uncertainty and instability. It is really difficult at the moment to see what 2015 will be like. The primary reasons for this uncertainty include the political situation, the forthcoming elections, the turmoil in the Middle East and battles over interests.”
INFORMATION TECHNOLOGY IS MORE HOPEFUL
There are also sectors which can look at the current uncertainty hopefully. One of them is the information technology sector. Index Group CEO Erol Bilecik says that, as a sector which is linked to foreign exchange, the information technology sector in Turkey may grow or contract by 10 percent in 2014 depending on the political uncertainty and changes in the foreign exchange rates.
But he explains why he is still hopeful of growth as follows: “The IT sector in Turkey is a sector which is relatively more independent from any kind of development in the economy as a whole and it tends to be one which grows anyway.
Especially the young population and the demand that results from the need for IT in education, entertainment and business life mean that it is one of the sectors that is less affected by these kinds of crises.~
I believe that the current negative economic conditions in Turkey and the sudden rise in the exchange rates have had an impact. But we predict that all sectors will recover quickly in the second half of 2014. I can say that 2015 promises to be much better.”
CLOTHING IS EXPECTING 10 PERCENT
The players in the clothing sector are expecting the sector to grow again in 2014 as a result of the significant momentum in retailing. Kiğılı CEO Hilal Suerdem says that, despite expectations of problems on the clothing market, 2013 went well for them and that they are expecting turnover to increase for 10 more years.
“Our forecast for a bad scenario is growth of 7 percent,” says Suerdem, and gives the reasons why he is expecting 10 per cent growth as follows: “We are used to the problems that may arise in 2014. There are currently 335 shopping malls and we are expecting another 30.
As the number of shopping malls grows, so do brands. The increases in turnover and the growth rate may be even higher. One of the targets for 2014 and 2015 is to have a presence in the shopping malls that are being built. Despite the election atmosphere and the political turbulence, we shall grow as Turkish retailers both domestically and abroad.”
