The latest country report from Atradius reveals the Turkish economy is forecast to bounce back in 2021 as it recovers from the effects of the coronavirus pandemic.
The Turkey Country Report by the global trade credit insurer highlights that in the aftermath of the currency crisis in 2018, Turkey’s economy grew just 0.9% in 2019. In 2020, while the economy had a strong start and saw recovery of credit growth, this rebound was abruptly halted by the global pandemic, which severely impacted both domestic and external demand. The Atradius outlook shows Turkey’s GDP growth is forecast to contract 5.1% in 2020 with private consumption and investment set to deteriorate by 6% and 2.4% respectively with a heavy blow to the tourism sector. Atradius reports Turkey’s economic downturn has been exacerbated by weak external demand, with exports expected to contract by almost 14% this year, despite the significant currency depreciation of the Turkish lira.
However, robust rebound is on the cards with Atradius economists forecasting growth of 6.7% in 2021, based on a sharp recovery of exports – up 14% – and domestic demand. Meanwhile, Atradius does warn that should a quick recovery of domestic and key export markets not materialise due to a second coronavirus wave, Turkey would be highly vulnerable to global economic shocks and could even suffer a comprehensive currency crisis. Exchange rate volatility continues to remains a major risk.
The Turkey Country Report, available free on the Atradius website https://atradius.co.uk, forecasts that payment delays and insolvencies will increase sharply this year. In its industry forecast, Atradius rates the construction and construction materials sectors with a ‘bleak’ performance outlook, having already suffered from the economic slump in 2019 with high levels of overcapacity, indebtedness and weak liquidity. The metals sector also has a ‘bleak’ outlook as a consequence of deteriorating demand. With a ‘poor’ outlook, many businesses in the consumer durables sector have experienced a serious deterioration in financial strength, negatively impacted by lockdowns, lower consumer sentiment, currency depreciation and rising unemployment. The ICT sector also has a ‘poor’ outlook due to its above-average credit risk, driven by increased import prices and deteriorating demand, as does the textile sector with overcapacity, decreasing demand and competition from East Asia. Other sectors with a ‘poor’ outlook are automotive/transport, machines/engineering, paper, services and steel. More positively, the financial services and food sectors are forecast to have a ‘good’ outlook while the outlook for agriculture and chemicals/pharma sectors is rated ‘fair’.
Darren Power, Northern Regional Manager for Atradius UK, said: “As is the case for many markets around the world, Turkey has been put under pressure by the coronavirus pandemic and ensuing containment measures which have curbed its expected rebound this year. However, despite a forecast decline in 2020, it is anticipated that the Turkish economy will bounce back next year and return to growth. This optimism is though dependent on the evolving environment and the path the pandemic takes in the coming months. We continue to face challenging times and it’s important for businesses to be proactive about risk management. This includes comprehensive research and real-time monitoring of the markets you’re trading in and understanding the potential impact on your customers and their ability to pay. Protecting your business from the risk of non-payment continues to be a key priority.”