After the interest rate decision was announced, the dollar and the euro rose to 9.4782 and 11.0064 lira, respectively – more than ever before.
(Photo: Bloomberg)
Istanbul The economic situation in Turkey is overheated: the economy is growing, but prices are rising faster than incomes. The lira is losing value and imports are becoming more and more expensive. “I can’t raise the selling price as fast as my electricity bill is increasing,” a Turkish wire manufacturer recently told Handelsblatt.
The picture is different for many companies in Turkey with German equity participation. According to a survey by the Istanbul Chamber of Commerce among 77 of the 327 member companies, a growing majority view the company situation more positively.
Companies in Turkey with German equity participation are therefore significantly more optimistic compared to the spring of this year, they want to hire more and invest more. At the same time, a growing number of respondents indicate that the country’s economic situation has worsened and may continue to deteriorate. How does that fit together?
Turkish lira: 40 percent minus within nine months
Since February alone, the Turkish lira has depreciated almost 40 percent against the euro and dollar. At the same time, inflation has climbed to 20 percent. Political squabbles cause investors and entrepreneurs to doubt the stability of their businesses.
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A total of 7,000 companies with German equity participation are active in Turkey. This means that the company is either the subsidiary or sales unit of a German company, or that a German owner holds shares in a Turkish company.
Of these, 327 are members of the Istanbul Chamber of Commerce and 77 participated in the survey. For around three quarters of them, the continued decline in the value of the lira is the greatest risk to their business activities.
62 percent also name the economic policy framework as a major risk – multiple answers were possible here. For 48 percent of those surveyed, rising energy prices pose a threat to business success in the country. Around half plan to adapt their own supply chains.
German companies in Turkey: difficult conditions, good business
On the one hand, many companies are complaining about the local conditions – which is understandable given the poor communication from Ankara and the poor implementation of the promised policy. 34 percent of those questioned expect that economic development in Turkey will even worsen. 40 percent believe the situation will remain tense. Only 26 percent said that the country’s economic situation would improve in the next few months.
On the other hand, the companies surveyed benefit massively from their presence in Turkey. Overall, the companies surveyed gave extremely positive opinions when it comes to the business situation and further developments. The current situation is rated as positive by 70 percent. 57 percent of those surveyed expect their situation to even improve in the next twelve months. “Only five percent predict a bad development,” says the study.
The good mood of German companies in Turkey is also reflected in the employment plans. 59 percent of those surveyed want to take on new employees, only twelve percent expect job cuts. 43 percent of those surveyed want to invest more. In the spring of this year, this value was still 25 percent.
Germany is Turkey’s largest trading partner again this year: From January to August, trade rose to 27.1 billion US dollars, even exceeding the level of 2019, i.e. before the start of the Covid pandemic.
German companies in Turkey are used to crises
“The good business situation and brighter business expectations of our members show that they are benefiting from the economic upswing,” summarizes Pahl the survey. “At the same time, the increased confidence of companies promotes investment and employment intentions locally and can thus further strengthen the economy.”
The established German companies in Turkey are used to crises. Currently, inflation in the country is around 20 percent – in the 1990s it was 140 percent at times. Even three successful coups in the past few decades did not get companies like Siemens or Bosch to leave the country.
In addition, there is the business structure of the companies surveyed. “Many of the companies surveyed are from industry with a large export business,” explains AHK managing director Thilo Pahl. And they would have benefited from the weak lira. Because when the lira is weak, more companies buy from abroad. And if the company itself accounts in euros or dollars, then real wages fall – the bottom line is that the company or its parent company in Germany does better business.
Pahl also counts the pharmaceutical industry among those industries that are benefiting from the current economic situation. Boehringer Ingelheim, for example, recently entered into a partnership with Abdi Ibrahim Pharmaceuticals, Turkey’s largest pharmaceutical manufacturer. The German company plans to invest 150 million lira in the medium term. At the beginning of the year that would have been a good 17 million euros, now it’s almost four million less.
“Our localization cooperation with Abdi Ibrahim Pharmaceuticals is one of the largest investments that we have made in Turkey since we were founded,” explains Yeliz Erbacıoğlu, CFO of Boehringer Ingelheim. No wonder: It has never been so cheap to expand cooperation in Turkey and invest money.
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