Turkish economic growth masks deep troubles for businesses, consumers
Turkey’s economy may grow this year, thanks to increasing exports, but the expansion masks deep problems for consumers and for companies focused on the domestic market, the Dünya newspaper reported on Thursday.
Consumer appetite for goods and services is in sharp decline because of a surge in inflation, and companies have seen costs increase by an average of 50 percent over the past year, Dünya said. Meanwhile, the manufacturing capacity utilisation of companies is falling.
Businesses have begun facing serious cost increases, including an average of 80 percent for energy, 40 percent for labour, 25 percent in rents and 50 percent in domestic transportation. The deterioration in the balance sheets of companies has been particularly pronounced for those with short foreign exchange positions after the lira slumped by 44 percent against the dollar last year, Dünya said, citing local business representatives.
Weakness in the lira has sparked a surge in inflation in Turkey. Consumer price inflation accelerated to 48.7 percent last month, a two-decade high, from 36.1 percent in December. Producer price inflation jumped to 93.5 percent from 79.9 percent.
The economic troubles are having a knock-on effect in manufacturing output. Capacity utilisation of businesses fell by 1.1 percentage points to 77.6 percent in January. That decline, coupled with deteriorating manufacturing PMI, is signalling recession in the country, Dünya said. Production has slowed in nine of 10 industries and total new orders eased for a fourth-straight month in January - PMI fell to 50.5 in January from 52.1 in December, nearing the point if contraction.
Trust and predictability in government policy is needed to help mobilise the domestic market, said Adnan Dalgakıran, head of the Turkish Machinery Federation (MAKFED), Dünya reported.
"I don't think it is possible to move consumption with artificial incentives and supports," he said.
İlker Önel, head of the Istanbul Merchants Club, said there was a 40 percent decrease in sales in the food sector compared to last year. Financing and energy costs were weighing heavily on the economy, companies are experiencing a serious decline in working capital and banks are set to start reducing their credit limits, Önel said. He called on the government to increase the amount of loans available through a national Credit Guarantee Fund (KGF) and to make the loans available to more companies.
The authorities should also increase instalment repayment term limits for consumers who purchase goods from retailers on their credit cards, Önel said. Furniture Associations Federation (MOSFED) chairman Ahmet Güleç said his members were calling on the government to increase the maximum number of such instalments to 18.
Yavuz Eroğlu, head of the TOBB, Plastic, Rubber and Composite Industry Assembly, said the government should also reduce taxes on some products, consumer loans must be made more accessible and cost effective, and an investment incentive mechanism should be introduced that provides firms with cost-effective financing and longer repayment terms.