Summary:
- Turkish Exporters Seek Support Amid Soaring Costs Despite Record Export Figures
- July Exports Hit Record US$22.5 Billion, but Exporters Struggle with Inflation and Lira Depreciation
- TİM Urges Relief Measures and Better Financing Options as Costs Surge and Market Share Declines
Turkish exporters are calling for relief measures and financial support as rising production costs force many companies to sell at a loss, despite record-breaking export figures.
According to the Türkiye Exporters Assembly (TİM), which represents over 140,000 exporters across 27 sectors, exports reached a record US$22.5 billion in July, marking a 14% increase compared to the same month last year.
With an average export figure of US$255 billion projected for 2024, Turkey is close to meeting TİM’s full-year target of US$267 billion.
While these figures indicate a strong performance, TİM chairman Mustafa Gültepe warns that exporters are grappling with severe inflation, high interest rates, and a weakening Turkish lira.
“We have achieved these results through significant sacrifices,” says Gültepe. “Companies are forced to accept orders at cost or below to maintain their customer base, which is clearly unsustainable.”
The Turkish lira has depreciated by around 20% against the dollar over the past year, inflation soared to 62% in July, and the central bank’s interest rate has surged to 50% from 8.5% in June last year. TİM also highlights challenges such as high energy costs and substantial taxes on imports of raw materials and intermediate goods.
“Production costs in Türkiye are very high. We are 40-50% more expensive in dollar terms than our Asian competitors. We are also 15-20% more expensive than some countries in Europe,” says Gültepe.
Muzaffer Aksoy, CEO of Bank ABC Turkey stated that production costs have surged by at least 100% annually, with some sectors seeing increases of over 120%. Meanwhile, the dollar has only risen by about 23%. This disparity between rising input costs and the exchange rate means exporters will struggle to stay competitive. Aksoy explains that exporters are unable to adjust their sales prices in foreign currency to match the dramatic local cost increases.
The bank is closely monitoring market conditions and anticipates that Turkey’s ratings may improve, which could benefit the economy. “But Turkey shouldn’t lose this opportunity by becoming too expensive,” he says.
Turkey has already lost market share in nine goods-exporting sectors tracked by TİM. For instance, exports from the apparel sector fell by US$1.2 billion in the first half of this year compared to the same period in 2023, a nearly 13% decrease.
TİM suggests several measures to alleviate the strain on exporters, including aligning the exchange rate with inflation and reducing taxes on imported materials not produced domestically. The association also advocates for lower energy costs and a review of regulations that burden producers and exporters.
Efforts are being made to improve financing options for Turkish exporters. Support from Türk Eximbank, the country’s export credit agency, has been valuable during tough times. TİM emphasizes the need for more favorable financing conditions to help exporters navigate these challenges.
Additionally, restructuring is underway for Türk Ticaret Bankası, a trade lender acquired in March 2023 by Export Development Inc, a partnership established by TİM and various banks and industry groups. Gültepe indicates that the bank will focus on providing trade finance to exporters struggling with access and is expected to start operations by the end of this year.
Main Author: John Basquill
Source: GT Review
