On the brink of an economic crisis, Turkey plots the course for a new normal
As with almost all countries, Covid-19 hit Turkey’s economy badly. According to the Turkish Statistical Institute, a contraction of 9.9 percent was the biggest in more than a decade. In response, the country brought in a new team of finance managers in November last year.
Since then, reports citing Turkey’s central bank indicate that its economy may have grown as much as 2.5 percent last year, which is better than most other major economies hit by Covid-19.
Public policies bearing fruit
A successful vaccination process, which started in December, helped with the country’s bounce. While Turkey started later, its rollout was faster, due to a logistics system that allowed fast and safe shipment to provinces. As of late February, the country has vaccinated nearly seven million people in just 40 days.
After the country brought in new finance managers last November, the government’s stimulus campaign has also borne fruit.
Mustafa Tonguç, Country Manager, DHL Express Turkey, said: “Turkey launched a new program to boost the country’s value-added exports, aiming to support firms in expanding their production capacity. The Turkish government has provided nearly US$260 million (€213.9 million) to support exporters during the pandemic.”
It also ramped up establishing new foreign logistics centers in strategic regions in Africa, the Americas, Europe, Russia, and the Far East. In January this year, Turkish Exporters Assembly (TIM) Chairperson Ismail Gülle revealed plans for a center in the United States, which is expected to accelerate local exporters’ access to markets and boost Turkey’s foreign sales volume.
“We have carried out a detailed study for the logistics center we plan to open in the U.S. We have a target of US$100 billion in foreign trade volume with the country. We believe that the logistics center to be opened is of great importance for us to achieve this goal quickly,” Gülle said.
Another significant indicator is e-commerce. With small and medium-sized Turkish businesses rapidly going global, Tonguç added: “As the pandemic transforms consumer behavior, companies have started focusing on hygienic delivery and customer support to ensure consumer confidence, and have increased their investments in digitalization with the understanding of the importance of e-commerce.”
It is expected that Turkey’s record of e-commerce trade volume of US$25.6 billion (€20.99 billion) by the end of this year will reach US$28.9 billion (€23.7 billion) next year, and the share of online shopping compared to retail could hit 38 percent.
Foreign logistics centers showing the value of connectivity
According to the Trade Ministry’s data released this month, Turkey exported to 226 countries last year, and exports hit an all-time monthly high of US$17.84 billion (€14.7 billion) in December.
Gülle also said the efforts to launch the foreign logistics centers abroad have been carried out under the Trade Ministry’s leadership for some time, adding that West Africa and North America stand out among the primary locations for those centers.
Tonguç added: “Turkey’s geography is still unique. Located at the crossroads of Europe and the Middle East, Turkey is close to the Balkans, Russia and Central Asia. It acts as a strategic stopover point between Africa and Europe.”
Turkey’s trade and geographical links are also crucial factors to why the country moved ten places up to 55th on the seventh edition of the annual DHL Global Connectedness Index (GCI).
John Pearson, CEO of DHL Express, believes that international connections such as Turkey’s are indispensable for maintaining the global economy, and help companies strengthen their trading levels.
He added: “As the new edition of the GCI shows, global trade, after a brief but sharp decline last year, has rebounded impressively. Trade and digital information flow play a critical role in keeping the world connected and generating forward momentum.
“In a global context, the renewed belief in the power of global cooperation, which appears to be at the core of the new U.S. administration, is especially encouraging.”
As it stands, Turkey ranks amongst the 10 countries with the largest increases in global connectedness from 2017 to 2019.
Tonguç elaborated: “Against the backdrop of a difficult economic situation in Turkey and falling national currency, the contribution of international flows to Turkey’s economy has grown significantly.
“Turkey’s gains on the index were broad-based, resulting in score gains across trade, capital, information, and people flows. The largest contributors to Turkey’s connectedness gains were on the trade and capital parts of the index.”
Turkey’s gains in exports were especially notable in the report, with figures for both goods and services growing significantly as a share of Turkey’s GDP.
Turkey’s economy expanded 1.8 percent year-on-year in 2020, amid the economic fallout from the coronavirus pandemic, the country’s statistical authority announced on March 1, 2021.
The country’s gross domestic product (GDP) at current prices stood at 5.1 trillion Turkish liras last year, according to the Turkish Statistical Institute (TurkStat).
The GCI also reveals that Turkey’s flows are smaller than expected but they are, at the same time, also distributed across a wider set of countries. In other words, Turkey outperforms on the global reach of its flows, even as it underperforms on the size of its international flows.
Tonguç concluded: “This period presents a unique opportunity for Turkey to become more connected: take advantage of the breadth of its connections around the world to boost the amount of business that flows over those links!”