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03/13/2019
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Turkey’s economic slowdown continues, but exports offer some support

Turkey

Turkey is experiencing a severe economic slowdown, coupled with a jump in inflation, as a result of the sharp depreciation of the lira during 2018 . This sharp depreciation has resulted in reduced consumption, and has impacted investment dynamics in the domestic market. The import-dependent structure of production has pushed the inflation rate to all time high levels, which forced the central bank to deliver a large rate hike in September. Although this rate hike has helped the Turkish lira to recover from these historical weak levels, it caused borrowing costs to rise extremely high, making funding extremely costly for both businesses and households. Growth is expected to remain very subdued and inflation at double digits.

 

These conditions have highlighted exports as an important source of revenue for the economy, despite many challenges. Government support remains vital for exporters to gain new market shares. This support has been mostly in the form of incentives for trade fairs and accessing new markets, among other methods. However, limited sophistication and competitiveness are restraining factors for further expansion of Turkish exports. Clients’ barganing power and the low level of technology incorporated in exported goods restrain higher gain from exports.

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