By Fatih Erkan Dogan
ANKARA
Economists are suggesting that Turkey could easily weather the negative effects of downgraded growth prospects for the EU economy next year, despite the country sending over 45 percent of its exports to Europe.
The EU Commission slashed its growth forecast to 1.1 percent on November 4 from 1.7 percent just six months ago, a strong indicator that the fragile recovery in the union may soon come to a halt.
This has spurred concerns in emerging economies, especially in Turkey, which chose the union as its largest export market.
Exports made in euro accounted for a 45 percent share of Turkey’s overall exports last year according to figures published by the country’s statistical authority, Turkstat.
However, economists are saying that the negative effects of slowing Eurozone growth on Turkey will be limited.
Bora Tamer Yilmaz, a senior economist from Ziraat Investment House said that Turkey is able to show economic resilience even as the EU hit subpar economic growth.
“As long as the euro area manages economic growth, even at sub-par levels, it would generate enough lift for Turkey to hang on to a 4 percent growth trend,” Yilmaz said.
“In 2012, when the euro area fell into recession, Turkey managed to grow by 2.2 percent and last year Turkish growth scored 4.1 percent while the euro area shrank by 0.4 percent.”
Yilmaz said that their research shows that Turkish exports are correlated with the German market and that a sharp depreciation of the euro may boost German exports – giving the Turkish market a lift.
Finansinvest research manager, Burak Kanli said that the EU contracted by 0.4 percent in 2013 [when Turkey increased its exports to the union by 6 percent] and is estimated to grow in next two years, albeit at a slow pace.
“Slow growth in the EU is a limiting factor for our exports. But it does not mean an increase in our exports would come to a halt,” Kanli said.
“Exports to the EU will continue to rise in 2015 but a downgrade of the EU growth outlook will be a limiting factor for the rate of increase.”
However, not all economists see the European Union’s waning economic growth prospects as a minor risk to Turkish economy.
“A one-percent expansion in the European economy enhanced Turkey’s exports to Europe by five percent, according to calculations. But euro area economies losing their momentum each passing day poses a negative risk for markets,” says financial analyst Eren Can Umut.
Many analysts see the depreciation in the euro as a supportive factor for European economic performance, which may ultimately help Turkey with its exports.
However, Umut points to usage disparity between the euro and the dollar in Turkey’s foreign trade and said that this will likely weigh on the Turkish economy more than other countries.
“I expect Turkey, which makes its exports with euro while making imports in U.S. dollars, to be negatively affected from the sharp decline in euro/dollar rate,” Umut noted.
Turkey makes 64 percent of its imports in U.S. dollars according to official figures.
Mainly driven by a strong export performance, Turkey has grown by 4.7 percent in first quarter of 2014 but the growth rate in the second quarter receded to disappointing 2.1 percent.
This was door to a hike in geopolitical risks in Iraq, which is second-largest export market for Turkey, plus a contraction in two major EU economies – Germany and Italy.
www.aa.com.tr/en
