World Economy

Turkish Businesses Reasonably Healthy Despite Hurdles

Turkish Businesses Reasonably Healthy Despite HurdlesTurkish Businesses Reasonably Healthy Despite Hurdles

Ibrahim Caglar, the head of the Istanbul Chamber of Commerce said that Turkish businesses expanded at reasonably healthy pace in 2014, in spite of geopolitical and economic hurdles.

“The conflict between Ukraine and Russia, tensions in Iraq and Syria, both Turkey’s neighbors, are also affecting economic agenda. Despite these risks, Turkey has reduced its trade deficit. Besides, the similar picture is waiting for Turkey in 2015; the export-oriented manufacturing and diversity in foreign markets will strengthen our hand,” Anadolu Agency quoted him as saying.

A look at Turkish mergers and acquisitions (M&A) activity in 2014 confirms Caglar’s observation. M&A targeting Turkish companies was valued at $9.6 billion up to the end of the third quarter of the year, according to statistics from MergerMarket released in September.

There were 125 transactions, with eight more deals than in the same period in 2013. Deal value decreased, however, by 28.9 percent. The consumer sector showed a very high level of activity with 31 deals through the third quarter in 2014, exceeding every other annual total on Mergermarket record.

Turkish companies have been energetically engaging in cross-border transaction this year, both inbound, for  $39.9 billion and outbound for $71.4 billion. It is the fifth consecutive year that M&A has increased, Mergermarket said.

 Economic Growth

Economic growth, in terms of GDP, has of course been slow. Turkey’s growth rate has been between 2.5 to 3 percent in the last few years. Caglar estimates that the economy in 2015 will growth above 4 percent, with exports as the driver.

But current slow growth is a challenge for Turkey. “Unfortunately these figures are well below our potential and our needs,” said Sabanci Holding Chair Guler Sabanci in a statement released to media. 

“However, the decline observed in the country’s growth rate is due to the turbulent economic environment in the world, lack of confidence in emerging markets, and lack of domestic investment due to the low national savings rate.” Gulenci warned of an upcoming reduction in foreign investment in emerging markets, as oil exporting countries are suffering from the low oil price, and the U.S. Federal Reserve’s tighter money policy is likely to attract funds to that country away from countries like Turkey.

She added that Turkey could escape from “middle income trap” by using its still considerable resources to increase the quality of its education as well as by nurturing innovation and creativity. The “middle income trap” occurs when wages rise in an exporting country to the point that exports are no longer competitive.

Turkey is actively shifting to high value-added exports that can compete around the globe.

Turkey’s exports stood at 151.7 billion in 2013 but the country wants to increase its exports further. Turkish exporters performed well in the first 10 months of 2014 with an average increase of 5.6 percent. Exports stood at $131 billion in October.