Business Monitor International


Turkey Business Forecast Report

Published 16 December 2014 | Quarterly

  • 51 pages
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  • Includes 3 free updated quarterly reports
 
$1,195.00
Turkey Business Forecast Report

Core Views

  • Although we view positively Turkey's long-term growth outlook, we expect slower, more balanced growth in the next decade relative to the previous one. This will result from less abundant foreign capital inflows and slower domestic credit growth.

  • Political uncertainty and social tensions will rise in the run up to general elections in 2015, further weighing on business and consumer confidence.

  • The government maintains a conservative fiscal policy with healthy budget and debt dynamics. However, recent populist policy initiatives lead us to question the government's long-term commitment to conservative fiscal management.

  • While the government's debt load is low by regional standards, the private sector's rampant external borrowing in previous years has greatly increased macroeconomic risks.

  • Lower commodity prices, in particular that of oil, has bolstered Turkey's short-term outlook. Lower imported energy costs will support household purchasing power and help reduce the current account deficit.

  • Nevertheless, we expect Turkey's current account deficit to narrow gradually in coming years, as its net hydrocarbon deficit will remain very large. Turkey will remain reliant on short-term foreign capital inflows to cover the sizeable current account shortfall, leaving it prone to tightening global liquidity and shifts in international risk sentiment.

  • A dovish central bank will keep inflation above target and ensure a volatile growth trajectory.

  • A major corruption scandal and increased incidence of popular protest have highlighted the fact that major political challenges still face the country over the medium term. In particular, the ruling Justice and Development party will take an increasingly unilateral approach as it struggles to maintain support, and will face growing and more vocal public and institutional opposition, with the potential for further unrest. Moreover, Turkey faces a challenging foreign policy environment amidst heightened...

Table of Contents

Executive Summary
5
Core Views
5
Major Forecast Changes
5
Key Risks To Outlook
5
Chapter 1: Political Outlook
7
SWOT Analysis
7
BMI Political Risk Index
7
Domestic Politics
8
Rising Security Risks In All Directions
8
Turkey will largely exclude itself from the fight against the Islamic State, as it sees greater dangers from joining the US coalition than
Turkey will largely exclude itself from the fight against the Islamic State, as it sees greater dangers from joining the US coalition than
from taking a passive stance
This will jeopardise the government's peace talks with Kurdish PKK separatists and exacerbate domestic
social tensions
Furthermore, Turkey faces rising security risks from all directions, and will find itself increasingly isolated from old and
new allies
Table: Political overview
8
Long-Term Political Outlook
11
Structural Changes To Continue
11
Turkey's moderate Islamist Justice and Development Party (AKP) will continue to press ahead with reforms to the country's political
Turkey's moderate Islamist Justice and Development Party (AKP) will continue to press ahead with reforms to the country's political
and social system for the foreseeable future
Although the AKP continues to enjoy broad popular support, its consolidation of power will
elicit strong opposition from the traditional secular establishment which threatens to trigger a wider backlash
In terms of foreign policy,
we expect Turkey to continue rebalancing its interests away from the West in favour of closer ties with former Soviet Union states, the
we expect Turkey to continue rebalancing its interests away from the West in favour of closer ties with former Soviet Union states, the
Middle East and North Africa
Chapter 2: Economic Outlook
15
SWOT Analysis
15
BMI Economic Risk Index
15
Economic Activity
16
Outlook Improving, But Slower Trend Growth Still Lies Ahead
16
Abundant global liquidity and falling oil prices have bolstered Turkey's short-term economic outlook, but a transition to slower, more
Abundant global liquidity and falling oil prices have bolstered Turkey's short-term economic outlook, but a transition to slower, more
balanced growth relative to the past decade will continue as the country's external rebalancing process has much further to run
We
forecast real GDP growth of 3
Table: GDP By Expenditure
16
Exchange Rate Policy
19
TRY: Short-Term Gains Won't Last
19
The Turkish lira will outperform other emerging market currencies in the coming months on account of improving terms of trade and
The Turkish lira will outperform other emerging market currencies in the coming months on account of improving terms of trade and
strong speculative capital inflows, but over the medium term the currency will remain on a depreciatory path owing to high relative
strong speculative capital inflows, but over the medium term the currency will remain on a depreciatory path owing to high relative
inflation, US dollar strength, and a dovish central bank
Table: Currency Forecast
19
Balance Of Payments
20
Oil Not A Game Changer For External Dynamics
20
Lower oil prices will support Turkey's external rebalancing process
8% of
GDP in 2015 and 2016 respectively, from 5
However, the deficit will still be one of the largest among major
emerging markets and the composition of external financing will remain precariously skewed towards volatile, short-term inflows
Table: Current Account
21
Monetary Policy
23
Monetary Easing Ahead
23
The Central Bank of Turkey (CBRT) will cut its main policy rate by 50 basis points in H115, to 7
75%, amidst low global yields and
declining headline inflation, but US rate hikes and lira depreciation will rule out further easing in the remainder of the year
Even so,
monetary policy will be too loose to meet the bank's inflation targets or mitigate the risk of capital flight should global risk appetite
monetary policy will be too loose to meet the bank's inflation targets or mitigate the risk of capital flight should global risk appetite
worsen
Table: Monetary Policy
23
Fical Policy
25
Healthy Fiscal Dynamics To Continue
25
Healthy fiscal dynamics and a relatively robust sovereign profile will remain strong suits of the Turkish economy
Nevertheless, we
forecast the budget deficit to average 1
9% of GDP from 2015-2017, which is wider than the previous years and above the government's
own projections
Table: Fiscal Policy
25
Chapter 3: 10-Year Forecast
27
The Turkish Economy To 2023
27
Convergence To Remain In Play
27
Although serious challenges face the Turkish economy over the next several years, we retain a positive view on its long-term
Although serious challenges face the Turkish economy over the next several years, we retain a positive view on its long-term
convergence prospects, with real GDP growth expected to continue outperforming the eurozone and many emerging European peers
convergence prospects, with real GDP growth expected to continue outperforming the eurozone and many emerging European peers
through to the end of our 10-year forecast period
Key economic policy and institutional reforms in the medium term will be necessary to
set the ground work for productivity gains beyond 2015
Significant risks will remain, however, especially as underlying social tensions
between secularists and moderate Islamists are unlikely to disappear in the next decade
This has contributed to our view that Turkey
will not join the EU anytime over our forecast horizon, eliminating a key policy anchor
Table: Long-Term Macroeconomic Forecasts
27
Chapter 4: Operational Risk
29
SWOT Analysis
29
Operational Risk Index
29
Operational Risk
30
Table : Operational Risk
30
Transport Network
31
Table : Emerging Europe Transport Network Risks
32
Economic Openness
35
Table: Emerging Europe - Economic Openness
36
Table : Top 5 Imported Products (USDmn unles otherwise stated ), 2007-2013
37
Table : Top 5 Trade Partners & Product Exports (USDmn unles otherwise stated ), 2007-2013
38
Chapter 5: Key Sectors
41
Infrastructure
41
Table : Infrastructure & Construction Industr y Data (2012-2017)
42
Table : Infrastructure & Construction Industr y Data (2018-2023)
43
Table : Oil Production (2012-2017)
47
Table : Oil Production (2018-2023)
47
Table : Gas Production (2012-2017)
48
Table : Gas Production (2018-2023)
48
Other Key Sectors
49
Table : Pharma Sector Key Indicators
49
Table : Telecoms Sector Key Indicators
49
Table : Defence and Securit y Sector Key Indicators
49
Table : Food and Drink Sector Key Indicators
50
Table : Autos Sector Key Indicators
50
Table : Freight Key Indicators
50
Chapter 6: BMI Global Assumptions
51
Global Outlook
51
Warning Signs Growing
51
Table: Global Assumptions
51
Table : Developed States , Real GDP Growt H, %
52
Table : BMI VERSUS BLOOMBERG CONSENSUS REAL GDP GROWTH FORECASTS, %
52
Table : Emerging Markets , Real GDP Growth , %
53

The Turkey Business Forecast Report helps businesses with market assessment, strategic planning and decision making to promote growth and profitability in Turkey and is an essential tool for CEOs, Chairmen, Finance Directors/CFOs, Managing Directors, Marketing/Sales Directors with commercial interests in this emerging market.

An influential new analysis of Turkey's economic, political and financial prospects through end-2018, just published by award-winning forecasters, Business Monitor International (BMI).

Key Uses

  • Forecast the pace and stability of Turkey's economic and industry growth through end-2018.
  • Identify and evaluate adverse political and economic trends, to facilitate risk mitigation.
  • Assess the critical shortcomings of the business environment that pose hidden barriers and costs to corporate profitability.
  • Contextualise Turkey's country risks against regional peers using BMI's country comparative Risk Rankings system.
  • Evaluate external threats to doing business in Turkey, including currency volatility, the commodity price boom and protectionist policies.

The Turkey Business Forecast Report by Business Monitor International (BMI) includes four major sections: Economic Outlook, Political Outlook, Business Environment and Key Sector Outlook.

Economic Outlook:

How will the Turkey economic policy-making and performance impact on corporate profitability over 2014-2018?

BMI provides our fully independent 5-year forecasts for Turkey through end-2018 for more than 50 economic and key industry indicators. We evaluate growth, and also forecast the impact of economic management.

Economic Outlook Contents

The Turkey Business Forecast Report features BMI's forecasts with supporting analysis for 2014 through to end-2018, set against government views and BMI's evaluation of global and regional prospects.

Key Areas Covered:

Data:

  • Full 10-year forecasts with data - for key macroeconomic variables including GDP (real growth and per capita), population, inflation, current account balance and the exchange rate.
  • BMI's comprehensive Risk Rankings system - rates each country worldwide for economic and political risk, and rates the business environment, within a global and regional context.

Written Analysis:

  • Economic Activity - real GDP growth, employment, inflation, consumption (retail sales and confidence).
  • Balance of Payments - trade and investment, current and capital account.
  • Monetary Policy - interest rate trends (bank lending and deposit rates) and inflation (producer price and consumer price).
  • Exchange Rate Policy - currency controls, foreign investment flows, exchange rates and foreign exchange reserves.
  • Fiscal Policy - macroeconomic strategy and policies, government finance and tax reforms.
  • Foreign Direct Investment - approvals, inflows and climate.
  • External Debt - debt profile (short and long-term plus public and private sector exposure).
  • Global Assumptions - forecasts for each year to end-2018 covering: major commodities, growth in key regions, inflation, and interest and exchange rates, in the United States, Japan, China and the eurozone.

Key Benefits

  • Rely upon BMI's 100% independent forecast scenarios for Turkey and underlying assumptions - we take no advertising and are privately-owned.
  • Exploit the benefits of BMI's comprehensive and reliable macroeconomic database on Turkey, sourced and fully maintained by BMI from an extensive network of private sector, government and multilateral contacts.
  • Gain key insights into the current and future direction of government economic policy, which could significantly affect your company's business prospects, from BMI's team of analysts and economists.

Political Outlook:

What are the political risks to doing business in Turkey over the next 5-years?

BMI's Turkey country Risk Rankings evaluate the short- and medium-term threats to political stability.

Political Outlook Contents

  • SWOT Analysis for the Turkey Market - Political Strengths, Weaknesses, Opportunities and Threats facing Turkey.
  • Political Stability and Risk Assessment - BMI's Risk Rankings assess explicit short- and long-term risks to political stability; latest ankings, rankings and trends for Turkey's risk are compared with regional and global averages.
  • Current Administration and Policy-making BMI assesses the threats to the continuity of economic policy, and likely changes to the business operating environment.

Key Benefits

  • Benchmark Turkey's risk profile against its neighbours, the global and regional average, allowing easy comparison of risks between key business markets.
  • Identify, evaluate and anticipate political and security risks to the business environment, and to your company's current operations and future plans.
  • Gain valuable insights into government and policy-making, through BMI's specialist team of analysts and economists, and their network of private and public sector sources.

Business Environment

Business Environment Risk Rankings with SWOT Analysis - Business Environment Risk Rankings for Turkey, benchmarked against rankings for regional neighbours.

Country Competitiveness - Competitiveness of Turkey's business operating environment in supporting corporate growth and profitability, compared with regional neighbours.

Business Environment Contents

  • Domestic Environment - Transparency, cronyism and corruption; labour market flexibility; corporate tax burden; interest rate levels; sophistication of banking sector and stock market; levels of business confidence; infrastructure and IT.
  • Foreign Direct Investment - Analysis of foreign investment regime; foreign ownership laws; attractiveness of business environment to foreign investors.
  • Foreign Trade - Analysis of trading environment, government trade policy, liberalisation measures, tariffs and membership of trade areas.

Key Benefits

  • Assess your company's evolving exposure to country specific operational and business risks, using BMI's in-depth analysis of the legal and regulatory business environment.
  • Understand your market's comparative strengths and weaknesses in the key areas of commercial infrastructure and business institutions, using BMI's proprietary global Business Environment Risk Rankings.

Key Sector Outlook

Which industry sectors in Turkey will grow fastest, and where are the major investment opportunities in the market?

BMI's identifies investment opportunities in Turkey's high growth industries including automotives, defence & security, food & drink, freight transport, infrastructure, oil & gas, pharmaceuticals & healthcare and telecommunications & IT.

Key Areas Covered:

  • Market Overview - Size and value of each industry with developments over 2009-2013, covering major industry key performance indicators (KPIs) that have impacted company performance.
  • 5-year Industry Forecasts - Forecasts for each year over 2014-2018, using BMI's proprietary industry modeling technique, which incorporates all key domestic and international indicators - including economic growth, interest rates, exchange rate outlook, commodity prices and demographic trends - to provide fully integrated forecasts across, and within, each industry.
  • Demand- and Supply-Side Data/Forecasts - BMI's industry data covers both the output of each industry and the domestic demand, offering clear analysis of anticipated import/export trends, as well as capacity growth within each industry.

Key Benefits

  • Target strategic opportunities in high growth industries, which are benefiting from global mega trends, and thus offer strong investment and growth opportunities.
  • Compare the growth path of different industries to identify which are best placed to benefit from domestic and international economic prospects, and which have historically suffered from volatile growth trends - a key indicator of future risks.

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Testimonials

The sections that I find most interesting and useful are the macroeconomic data and forecasts for the country, top export destinations and economic activity. The indicators/analysis of these areas helps us orient our thinking, our assumptions and, consequently, our decisions in the commercial area.

Country Manager, DHL Express