Turkey has a strategic geographic location and an open, and increasingly liberal, trade and investment climate. A young and rapidly growing population provides a key ingredient for robust long-term growth potential. Turkey is still a major convergence play for investors, despite brewing political risks and a lack of progress in the EU accession process. While Turkey's public debt load is low by regional standards, the private sector's rampant external borrowing in previous years has greatly increased macroeconomic vulnerabilities.

We keep our clients informed of the latest market moves and political developments as part of our 'top-down' and 'bottom-up' perspective in Turkey. Clients also benefit from in-depth analysis on 25 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert teams. We aim to keep you ahead of the curve, so you can do business with ease in Turkey.

Country Risk

Turkey Country Risk

Turkey Operational Risk Coverage (9)

Turkey Operational Risk

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BMI View: Turkey's labour market inhibits the business environment due to the low skill level of the workforce and limited participation, particularly among females. This means that Turkey is currently unable to harness its favourable demographic situation by turning its large, young population into skilled workers. Consequently, businesses face a heightened need to import foreign professionals and provide additional training for Turkish employees, which entails additional costs and bureaucratic obstacles. Nevertheless, for businesses willing to overcome these risks, Turkey offers one of the largest and most highly...

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Turkey Crime & Security

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BMI View: Turkey is generally a safe place for foreign business travellers, tourists and expatriates. Although Turkey's overall Crime And Security Risk score is depressed by a relatively high terrorism threat and tense relations with its neighbours, these risks do not pose a great threat to foreign businesses. Turkey scores 39.2 out of 100 in our overall Crime and Security Risk Index, placing it 20th out of 29 countries in the Emerging Europe region.

The most pronounced crime and security risk to business operations in Turkey is from terrorism. Turkey's domestic terror groups...

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Turkey Labour Market

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Turkey's labour market inhibits the business environment due to a general lack of education among the workforce and low levels of participation in the formal labour market, particularly female participation. In addition, labour force participation is yet to recover its pre-2008 crisis peak. This means that Turkey is currently unable to harness its favourable demographic situation by turning its large, young population into skilled-workers. Consequently, businesses face a heightened need to import foreign professionals, which increases risks of additional costs and bureaucratic obstacles. Considering these factors, BMI awards Turkey a score of 55.3 out of 100 for overall Labour Market Risk. This equates to 18 th place out of the 30 countries in Emerging Europe, between Azerbaijan and Croatia.

Risks associated with the availability of labour are pronounced in Turkey. At 29.4%, Turkey has the lowest rate of...

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Turkey Logistics

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BMI View: Turkey offers investors a more highly developed logistics network than most of its peers in the Emerging Europe region. The country's international trade links and port facilities are highly developed, facilitating efficient supply chains for the country's key manufactured goods exports. Investment in inland transportation options will enable the network to cope with growing trade volumes. Consequently, Turkey is ranked third out of 30 states in Emerging Europe in the BMI Logistics Risk Index, with a score of 63.1 out of 100. Although the utilities network offers relatively good reliability, the reliance on fuel imports exposes electricity and diesel supplies to disruption due to geopolitical risks. In addition, water scarcity is becoming an increasingly pressing issue, and will deter investment in water-intensive industries.

Investor sentiment towards Turkey has improved...

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Turkey Trade & Investment

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BMI View: Despite offering an open trade and investment regime, and welcoming foreign direct investment (FDI) in almost all sectors of the domestic economy, a number of risks continue to cloud Turkey's operating environment. This is largely due to a moderate tax burden, stalled bureaucratic reforms, and lingering issues over corruption at all tiers of government. Having said that, investors may be willing to overlook these concerns due to the country's considerable investment opportunities, generous fiscal incentives and sophisticated financial markets. Overall, Turkey is placed among the more attractive investment destinations regionally in the BMI ...

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Turkey Industry Coverage (25)

Agribusiness

Turkey Agribusiness

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BMI View: We favour the sugar sector in Turkey because of the strong growth potential of the country's confectionery industry and our belief that large changes to the country's sugar production quotas are likely to occur in the coming years. We see upside potential in the livestock sector, as the government's supply of discounted credit has aided growth in recent years. We see some growth potential for the grain, dairy and rice sectors and production in these sectors will recover in 2015/16 following drought in 2014.

Agribusiness Market Value
BMI Market Value By Commodity (2011-2019)
...

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Autos

Turkey Autos

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Sharp declines in commercial vehicle manufacturing weighed on total output in Turkey, despite sustained gains in passenger car manufacturing, resulting in vehicle output growth of just 4% in 2014, to 1,170,445 units.

BMI maintains a bullish view on the country's autos exports outlook. This reflects the European passenger car market's resurgence from a period of marked declines, and sustained currency weakness which makes Turkish exports more competitive. Furthermore, a number of auto manufacturers have invested in the country for export.

Total vehicle sales in Turkey in 2014 declined 9.5%, to 804,467 units. Generally, sales in both the passenger car and commercial vehicle (CV) segments have remained weak over the year. BMI forecasts a 2.8% drop in total vehicle sales in 2015.

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Commercial Banking

Turkey Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Turkey Consumer Electronics

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BMI View: Turkey's Consumer Electronics market is considered to have a strong medium-term growth outlook, as a convergence of broad based income growth, globally declining device prices, improvements to supporting infrastructure and expanded domestic production drive market development. However, there is significant downside to our core scenario as Turkey continues to be among the European markets most exposed to downside risk. For instance, Turkey continues to be dependent on external financing, which leaves domestic credit growth exposed to international sentiment and this is a particular concern given the importance of credit as a driver of Turkey's economy. Meanwhile, there is also downside...

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Defence & Security

Turkey Defence & Security

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BMI View: On the whole, Turkey is one of the more stable countries in the Near East region. That said, the instability in its surrounding neighbourhood is affecting Turkey's regional interests. BMI thinks that international dynamics are bringing Turkey to roll back somewhat its Syrian policy, notably through modification of its previous support of extremist groups in the region. Turkey is continuing its efforts to boost its indigenous defence production capacity are continuing via investments, joint ventures with international companies. From the BMI perspective, Turkey could serve as a potential market to opt for cheaper offshore production processes, although caution is necessary.

We expect that Turkey will spend up to USD20.6bn on defence in 2014. Up to and including 2019, we expect Turkey to spend an average of USD28.4bn on defence annually. We anticipate that Turkey...

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Food & Drink

Turkey Food & Drink

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BMI View: Although abundant global liquidity and the collapse in oil prices since June 2014 have bolstered Turkey's short-term economic outlook, more balanced growth relative to the past decade will continue, spearheaded by the decline in consumption expenditure. We forecast private consumption to grow by 1.7% in 2015, from 0.8% in 2014. Over the next few years, much slower consumer credit growth will cap potential growth in private consumption due to both supply and demand-side constraints including higher lending rates, subdued consumer confidence and government mandated restrictions on unsecured lending.

That said, we do not believe food consumption growth in Turkey will be drastically affected. We hold this view due to the fact that the slowdown in private final consumption in Turkey will be fuelled by the decline in credit purchases,...

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Freight Transport

Turkey Freight Transport

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Following a year in which BMI believes saw steady growth across the whole of Turkey's freight transport sector, 2015 will signal further improvement in line with the country's continuing economic growth.

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 4.75% in 2015 following an estimated growth of 3.25% in 2014.

Road freight is to continue to dominate the sector and is projected to grow by 5% in 2015. The mode has made a prompt recovery from the downturn and enjoys the benefits of not having to make any reductions in road haulage volumes, such as those pledged by the neighbouring EU.

Growth in rail freight volumes will continue to be helped by the Marmaray rail tunnel under the Bosphorus Strait, which was opened in 2013.

The throughput at the Port of Ambarli, one of Turkey...

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Information Technology

Turkey Information Technology

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BMI View: Our core scenario for Turkey is bullish over the medium-term as a convergence of income growth, declining device prices, inward investment and domestic modernisation initiatives drive demand growth. Turkey has seen foreign investment in ICT rise over the last three years and it is increasingly being viewed as a regional hub with a strategic geographical location. Meanwhile, the government will also be a positive influence on this sector through a supportive policy umbrella and its goals for Vision 2023. However, there exists significant downside risk from both the vulnerability of the economy to external shocks and the...

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Infrastructure

Turkey Infrastructure

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BMI View : Turkey's drive to increase the private sector's presence in the infrastructure sector has gathered pace in early 2015, in line with our view that despite short-term headwinds, Turkey presents an attractive long-term market. Financing risks have grown over the past year, particularly in light of a depreciating currency and we are monitoring political risks in the form of President Erdogan's growing grip on power.

On the back of a strong project pipeline, we maintain a healthy construction industry real growth outlook. Average real construction industry growth for the period 2015-2024 is forecast at 4.7%.

Key Forecasts And Developments

  • ...

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Insurance

Turkey Insurance

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BMI View: Turkey's insurance market remains underdeveloped by global standards, though it is one of the leading emerging markets and already boasts considerable overall premiums and assets. Following several years of growth, currency fluctuations resulted in a market contraction in US dollar terms in 2014. The outlook for 2015 is more positive, with growth expected in both local currency and US dollar terms as Turkey records healthy GDP growth of around 3.5% - providing a boost to demand for life and non-life products.

Turkey's non-life sector is expected to record marginally stronger growth than the life sector in 2015. The non-life sector in general is much more developed than the life sector in Turkey, accounting for around 85.8% of all premiums written and with a much higher penetration rate of 1.2% (premiums as a percentage of GDP) compared to just 0.2% in the life sector (...

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Medical Devices

Turkey Medical Devices

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BMI Industry View: The Turkish medical device market is expected to grow by a CAGR of 3.4% over the 2013-2018 period, driven by import growth, the expansion of healthcare facilities and rising health expenditure. The market is largely supplied by imports but its reliance on medical devices manufactured outside of the country should reduce if the government is successful in implementing a project that is intended to boost the domestic production of diagnostic medical devices and other medical equipment.

Headline Industry Forecasts

  • In 2013, the Turkish medical device market was estimated at USD2,421.6mn, or USD32 per capita. This total was almost twice the size of the Czech market; in per capita terms, the market was similar to Bulgaria. The 2008-...

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Metals

Turkey Metals

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BMI View: Despite relatively weak growth to be expected over the coming months, the medium-term outlook for Turkey's metals sector remains promising due to strong demand from the domestic construction and autos sectors. Near-term headwinds are likely to include currency weakness making imports of materials more expensive and weak global steel prices squeezing steel-makers' margins. Long-term political risk in Turkey also presents a key downside risk.

Over the medium-term we forecast Turkey's total steel production to grow from 34.7mnt in 2013 to 44.6mnt in 2018. We expect growth to average 5.2% y-o-y over 2014-2018, as we predict a recovery from the negative growth seen during 2013, which was a result of weak...

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Mining

Turkey Mining

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BMI View: Turkey's mining industry is set to be on the radar of foreign investors in the years to come as the government has undertaken efforts to open up the sector, paving the way for forthcoming investment. The gold sector will attract the largest share of investment as several companies bring their projects into production. Nevertheless, Turkey's extremely poor mining safety record and weak global commodity prices will limit the industry's otherwise healthy growth.

We believe investment into Turkey's mining sector will be forthcoming over the coming years as Prime Minister Tayyip Erdogan pledged to transform the country into one of the 10 biggest economies by 2023. With more than 50...

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Turkey Mining

Oil & Gas

Turkey Oil & Gas

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Manufacturing Sector Will Remain Main Driver Of Growth

A main driver of stronger real GDP growth in Mexico in the coming years will be robust manufacturing sector output. The country's manufacturing sector, with an estimated value of USD12.6bn in 2013, accounts for 16.6% of GDP. Manufacturing output has averaged annual real growth of 2.0% over the last five years, above Mexico's average real GDP growth of 1.9% over the same period. We expect manufacturing to remain an outperforming sector in Mexico in the coming years, driven by ease of access to a recovering US consumer market. The sector was negatively affected by poor weather in the US earlier this year, but improving manufacturing sector confidence ( see chart below) suggests that a sustained recovery will take place in the coming quarters.

Improving Confidence Points To Sustained Recovery
Mexico...

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Petrochemicals

Turkey Petrochemicals

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BMI View: The fundamentals of Turkey's petrochemicals market (a growing population, the privatisation drive and a thriving role as an energy and transport hub) will keep the market on the watch list for investors, particularly in relation to opportunities in the polyvinyl chloride (PVC) and construction polymers market.

The country's largest petrochemicals producer, Petkim, expanded its ethylene and purified terephthalic acid (PTA) capacities increased by 80,000 tonnes per annum (tpa) and 70,000tpa respectively. This should boost production in 2015, following a subdued year in 2014 when chemical production grew by around 4% in 2014 while plastic and rubber products rose 3.5%. The country should benefit from cheaper naphtha prices, although low consumption growth has caused a drop in product prices on the...

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Pharmaceuticals & Healthcare

Turkey Pharmaceuticals & Healthcare

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BMI View: Turkey possesses all the key growth fundamentals for an attractive pharmaceutical sector, but heavy regulatory oversight will stifle growth over the short term. Over the longer term, we expect the regulatory burden to lessen and become more amenable to the sector. In contrast to European markets where manufacturers can expect to achieve higher prices, but with a stagnant growth outlook, Turkey offers strong growth potential if drugmakers are able to accept prices that are considerably below the European average and turn a profit on the low margins available.

Headline Expenditure Projections

  • Pharmaceuticals: TRY18.28bn (USD8.38bn) in 2014 to TRY19.72bn (USD8.57bn) in 2015; +7.9% in local currency and +2.3% US dollar terms.

  • Healthcare: TRY109.41bn (...

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Power

Turkey Power

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BMI View: This quarter we have extended our forecast to 2024. This notwithstanding, we maintain our view that Turkey's position in the region as a key power market over the coming decade will get increasingly more important, accounting for nearly one-fifth of the CEE's total capacity by 2024. We expect power demand in Turkey to be robust over the coming decade, given the high levels of investment being channelled into its power sector, the country's capacity expansion plans and its improving economic outlook. There is also considerable political backing for power sector expansion...

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Real Estate

Turkey Real Estate

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BMI View: Turkey's commercial real estate sector has established itself as one of the strongest performers in Europe with robust levels of consumer-led growth supporting significant expansion in the market over the past few years. The retail and office markets have been the recipient of growing levels of international interest, with the shopping mall segment in particular undergo rapid development. However, the industrial sub-sector has remained lacklustre as the export market has come under increasing pressure.

The Q115 Turkey real estate report focuses on the country's two principal commercial real estate markets of Istanbul and Ankara and monitors developments and performance of the office, retail and industrial segments in both cities. The key theme we are witnessing across the sector is growth, with the country's robust economic expansion continuing to fuel demand for commercial space in...

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Renewables

Turkey Renewables

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BMI View: Turkey will remain committed to its renewable energy expansion plans in order to reduce fuel import costs at a time when power consumption in the country is set to surge and the lira continues to depreciate. Wind will drive the renewables expansion; but we highlight that the upsides are mounting for growth in solar capacity.

Despite the dominance of thermal generated electricity, Turkey's renewables sector presents significant growth potential across most technologies, including wind, geothermal and solar power. Turkey has made impressive progress with its renewable energy expansion over the last decade, and across both Western Europe and Central and Eastern Europe (CEE), we see Turkey emerging as a key market; with strong project pipelines, robust growth...

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Retail

Turkey Retail

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BMI View: We retain a positive growth outlook for the Turkish retail sector in 2015 and beyond. Total household spending will be spurred by the growth of the economy and rising income of consumers. We anticipate that 2015 and the next four years will mark the expansion of the largest retail chains into the country's periphery as well as the further intensification of competition in the cities.

Turkey continues to emerge as a centre of influence and economic gravity in South Eastern Europe. However, it is set to face several external challenges in 2015. The political and economic crisis in Russia is affecting most of the country's trade partners. According to the Turkish Statistical Institute, Russia is Turkey's third largest origin of imports, with the total value of USD2.3bn of goods bought by Turkish companies and consumers...

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Shipping

Turkey Shipping

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BMI View: There is a mixed picture for Turkish exports in the coming quarters, which could end up having an influence on our shipping forecasts by the end of the year. While eurozone growth momentum is strengthening after a soft patch in H214, external demand from other key markets will continue to suffer. Russia and CIS states together accounted for 12.0% of total exports in 2013 and export growth to this region contracted by 6.5% y-o-y in H214. This contraction will deepen in H115 on the back of a severe recession in Russia and its knock-on effects in neighbouring CIS states. Meanwhile, Iraq is Turkey's second largest export market and sectarian conflict in the country has severely disrupted many trade routes.

In 2015, annual growth across the board at Turkey's main ports is set to be very healthy, with the port of Ambarli forecast...

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Telecommunications

Turkey Telecommunications

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BMI View: The Turkish telecommunications market, as with many other markets in the region, is experiencing a switch from traditional legacy services - voice and messaging- towards more advanced data services. This is clear through the success of 3G and increasing smartphone penetration, which will be further boosted by the launch of 4G, but also through greater uptake of fibre and VDSL services in the fixed broadband space. Growth in new services will offset decline in traditional services, with bundling a way for operators to ensure the decline is not sudden. There are regulatory risks however, as the Turkish government grows authoritarian by blocking social networking sites, while taxes and import tariffs may weigh downo a successful part of the economy.

Key Data

  • Data services continue to grow through 3G uptake,...

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Tourism

Turkey Tourism

Water

Turkey Water

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BMI View: We believe the ongoing drought, the reduction of the water resources, and the rising demand for thermal electricity generation pose serious risks to the Turkish water sector. Moreover, continued regional tensions between Turkey and its neighbours concerning the former's extensive dam construction and the latter's calls to slow or even halt construction of many of Turkey's water infrastructure projects will have a long-term impact on the sector.

Overall, Turkey has an open trade and investment environment and actively encourages foreign investment however waning investor interest is acting as a drag on FDI levels Turkey has seen a sharp drop-off in FDI into the water sector since 2012. In 2010 it had the third largest level of FDI into water collection, distribution and...

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