December 2023

The double earthquake that occurred in February 2023 was likely to be the defining event of this year. An unprecedented tragedy which has become the worst natural disaster of our time with an extremely heavy human toll: more than 50,000 dead and more than 100,000 injured.The area of ​​the 11 affected regions reached 100,576 km2.The material damage caused by these devastating earthquakes was estimated at more than 100 billion USD by the UN.

Economically, inflation continued to be the government’s primary concern. After the re-election of President Erdogan in the presidential elections in May 2023, the new economic team put in place undertook a total change in monetary policy by starting a series of increases in its key rate. Thursday, December 21, was the 7th consecutive month of increase, raising the rate to 42.5%. The Central Bank nevertheless gave signs of slowing down the process of monetary tightening as the level of monetary tightening would be “significantly close to that required to establish the course of disinflation” according to a press release.The institution expects inflation to rise from nearly 62% in November to a range of 70% to 75% in May 2024, before falling back to around 36% at the end of next year.For several years, Türkiye has faced galloping inflation which has seen its currency considerably weakened.The pound is down 35% against the dollar since the start of the year and has lost more than 80% of its value against the greenback over the past five years.

Despite a difficult year, 2023 ends on rather optimistic economic notes with three consecutive quarters of sustained growth (4% in Q1, 3.8% in Q2 and 5.9% in Q3) and a historically low unemployment rate.On the investment side, foreign companies have maintained their commitment to Turkish territory. During the first ten months of the year, the country welcomed 7.8 billion USD in foreign direct investments (FDI) with France being part of the top 5 countries having invested the most during the said period (315 million USD) illustrating the strengthening of Türkiye's attractiveness. FDI flows were mainly towards wholesale and retail trade, storage, the chemical industry and ICT. This year again, the country has particularly established itself as a popular destination for sourcing by European manufacturers who continue to look for sources of diversification of their supplies outside of East Asia and close to their market.

Internationally, Türkiye should continue to benefit from the advantages of its geostrategic position to pursue its role as mediator in the region which remains particularly vulnerable in terms of international diplomacy. The continuing war in Ukraine and Syria, tensions in Nagorno-Karabakh and the recent outbreak of conflict between Palestine and Israel leading to an unprecedented humanitarian disaster in Gaza are expected to reaffirm Türkiye as a key regional player in the Middle East.

Finally on the domestic political side, after the presidential and legislative elections of May 2023, the poll of which saw the victory of the Popular Alliance (led by the Justice and Development Party, AKP, and by the Nationalist Action Party, MHP ) which retained the absolute majority of seats and the re-election of President Erdoğan, the year 2024 will be marked by the municipal elections which will take place next March.

Economic & business news from Türkiye

Türkiye records spectacular growth of 5.9% in Q3 2023

Türkiye recorded GDP growth of 5.9% in Q3 2023, a figure well above market expectations of between 4.1% and 5.2%. This is the 13th consecutive quarter of growth recorded by Türkiye since Q2 2020.

The sectors that contributed the most to this performance are:

• Construction: +8.1%
• Industry: +5.7%
• Finance and insurance: +5.1%
• Services: +4.3%
• Public administration, education, health and social services: +3.6%
• Real estate: 2.7%
• Other services: 2.2%
• Information and communication activities: 1.7%
• Agriculture: 0.3%

Investments particularly accelerated in Q3: this is in fact the category which experienced the fastest growth (+14.7%). Its contribution was 3.4 points to growth. Investments in machinery and equipment and in construction notably performed well (+23.7% and +7.9% respectively).

The construction sector recorded a particularly notable performance which can be explained by the reconstruction projects started following the devastating earthquakes of last February. Resident household consumption expenditure increased by 11.2% while state final consumption expenditure increased by 5.3% year-on-year.

Exports increased slightly (+1.1%) while imports increased by 14.5% compared to Q3 2022. During the said period, professional, administrative and support services activities decreased by 2.5%.

Additionally, growth figures from previous quarters were revised upwards to 3.9% for Q2 (from 3.8%) and 4% for Q1 (from 3.9%).

Source: Capital, November 30, 2023

Unemployment at lowest since November 2012

According to figures published by the Turkish Statistical Institute (TUIK), the unemployment rate in Türkiye fell to 8.5% in October 2023. This is the lowest level in 11 years; the unemployment rate was 8.4% in November 2012.

The number of unemployed aged 15 and over now stands at 2,961,000 people, down 0.5 points compared to the previous month. The unemployment rate for men is 7% while that for women is 11.3%. For young people aged 15-24, this rate stands at 16.3%, down 0.4 points compared to the previous month. The employment rate reached 48.5% with 31,835,000 people in employment while the active population stands at 34,796,000.

Source: Bloomberg HT, December 11, 2023

The World Bank grants 155 million USD loan

The World Bank provided a USD 155 million loan to the Industrial Development Bank of Türkiye (TSKB) to establish the Türkiye Green Fund, with the guarantee of the Ministry of Treasury and Finance .

Türkiye Green Fund, the first loan-backed venture capital investment fund both in Türkiye and globally, is dedicated to reducing emissions and promoting inclusive transformation. With a roadmap prioritizing climate risk management, it is expected to have a substantial impact on Türkiye's zero carbon goal by 2053.

TSKB's aim is to play an effective role in the green transformation journeys of businesses in the country, improve the diversity, scale and multiplier impact of funds for climate finance via capital markets.

Under the project, which will mobilize the contribution of the private sector as well as the public to fill the current financing gap in Türkiye, the beneficiary companies will benefit from a balanced debt level and strategic growth opportunities through investments in equity.

Source: Hürriyet Daily News, December 15, 2023

Renault to invest 400 million EUR in Bursa

Renault Group with its Turkish partner Oyak Renault will invest EUR 400 million in Türkiye in the Bursa factory to accommodate the production of 4 new models, including 3 SUVs, and for the first time the low-cost Duster SUV which will be marketed under the brand. Renault.

The Duster, an economical model and king of SUV sales in Europe, is currently assembled in Romania, and will be sold in Türkiye under the Renault badge. With this investment, the French manufacturer aims to overtake the current leader of the Turkish market, the Stellantis group, by “strengthening its brand with a product line rich in SUVs, and the electrification of the range with hybrid and electric vehicles”. It will also launch production of a new generation of hybrid engines from 2025, and each model will offer a hybrid version. The group plans to sell a third of electrified cars from 2027 in Türkiye. Since 2023, it has been selling Clio and Austral in hybrid versions, and the electric Megane E-tech, made in France.

The Bursa plant currently manufactures the Renault Clio and the Mégane with a thermal engine. The factory, which currently has a capacity of 390,000 vehicles per year for a workforce of nearly 6,300 people, was launched in 1969. Last year, just under 250,000 vehicles left the factory. A true production and re-export hub, Bursa also aims to expand its export presence beyond Europe alone, targeting all markets located around Türkiye.

The French automobile group's objective is to be "more profitable" outside Europe. To do this, it launched an “international offensive” at the end of October, announcing an investment of EUR 3 billion in accordance with its new Renaulution strategic plan. The group plans 8 new vehicles by 2027 outside Europe, including 5 in the segments more high-end C and D (compact and family), more profitable and corresponding to the group's move upmarket.

Source: Stock Exchange Zone, December 7, 2023

Azelis strengthens its position on the Turkish market

Belgian Azelis, one of the leading service providers in the specialty chemicals and food ingredients industry, announces that it has signed an agreement to acquire 100% of the shares of Oktrade Kimya Sanayi ve Tic. A.Ş, a Turkish distributor of personal care and cosmetic products based in Istanbul. Already active in the Turkish personal care market, Azelis enriches its offering by strengthening its lateral value chain with this acquisition, allowing it to become a leader in this fast-growing market.

Founded in 2017, Oktrade has a strong portfolio and technical expertise in the areas of color cosmetics, skincare and suncare, complementing Azelis' existing portfolio. The company, which employs 12 people, also operates an applications laboratory, which will expand the existing capabilities of Azelis' personal care laboratory in the country and support the Belgian's commitment to providing the most innovative solutions both to its customers and its clients.

Azelis is a major investor that entered the Turkish market in 2007 with the acquisition of Tara Kimya, specializing in coatings, chemicals and plastic additives. Since then, Azelis has continued to develop on the Turkish market through external growth with 3 other acquisition operations, 2 of which were carried out in 2022 (Tunçkaya and Dağaltı). This latest acquisition demonstrates Azelis’ long-term commitment and confidence in the Turkish market. Azelis Türkiye aims to grow steadily in the demanding and highly competitive specialty chemicals market in Türkiye. In order to cover the entire territory, the company has an office in Istanbul and several warehouses in the main commercial areas of the country.

Source: Azelis, December 7, 2023

CS Wind to establish 3rd factory in Türkiye

The South Korean group CS Wind plans to establish a 3rd factory in the city of Izmir which will be added to the 2 sites that the group already has in the Aliağa ZIO. The investment plans to be carried out in two stages on a plot of 350 hectares and generate 1,000 jobs. The first stage of this investment should amount to 130 million USD. This additional site aims to respond to the increase in European orders which intend to intensify within the framework of carbon neutrality objectives. CS Wind Türkiye wants to start the production of marine turbine towers, which are not produced in Türkiye at present, as soon as possible.

CS Wind is an international wind turbine tower manufacturer with a 17% market share globally (excluding the Chinese market). The group has production centers in America, Denmark, Portugal, China, Taiwan, Malaysia and Vietnam.

The group entered the Turkish market in 2018 by purchasing the firm Ege Kule. Türkiye has since become a real production and re-export hub, particularly to Europe, America, North Africa and the Middle East. Production increased from two tower sections per week to 50 sections. The increase in costs in Europe and the evolution of transport prices have had a positive impact on the competitiveness of CS Wind and distinguished it from the competition.

Source: Dünya, November 27, 2023

Abdi Ibrahim joins forces with Aronpharma

Turkish pharmaceutical giant Abdi Ibrahim Pharmaceuticals has acquired the sales and distribution rights in the Turkish market for the Berroxin brand from the Polish company AronPharma.

AronPharma is one of the largest European pharmaceutical companies manufacturing innovative products in the field of food supplements. The products presented under the Berroxin brand help support the immune system of patients. Berroxin contains the highest available concentration of Fenactive®, a complex blend of aronia and elderberry extracts.

With this partnership, Abdi Ibrahim continues to strengthen its position in consumer health products. Dietary supplements are a category with intense competition and market in Türkiye; this agreement demonstrates the determination of the Turkish giant to be a major player in this area. The products are expected to be delivered to consumers before the end of this year.

Source: Ekonomim, November 27, 2023

Turkish Airlines places order with Airbus

The Turkish airline Turkish Airlines has announced a historic total order of 355 Airbus aircraft, including a firm order for 220 aircraft (and 135 additional aircraft).

The order includes 150 A321 NEOs and 70 A350 wide-bodies (50 A350-900s, 15 A350-1000s and 5 A350Fs, the freighter version). The agreement will bring the Turkish Airlines fleet to nearly 800 aircraft within ten years, compared to 439 currently. This giant order will allow the Turkish company to become one of the largest airlines in the world in the coming decade in accordance with its 2023-2033 strategic growth plan and demonstrates its international ambition, particularly towards Asia. and Africa. Currently, the company claims to hold the title of the airline that serves the most countries in the world.

Turkish Airlines' existing fleet has almost as many Airbus aircraft as Boeing. This contract brings Turkish Airlines' order book with Airbus to 504 aircraft, of which 212 have been delivered. At the same time, the company signed agreements with Rolls Royce for the maintenance and supply of spare engines for the fleet.

Source: Journal Aviation, December 15, 2023

Kiko Milano increases the number of stores in Türkiye

The Italian makeup brand KIKO MILANO continues its expansion in Türkiye with the opening of 3 new points of sale. The brand is thus increasing the number of its stores to 27 on Turkish soil. The 3 new stores are all located in shopping centers (2 in Istanbul and 1 in the city of Kayseri). Kiko Milano entered the Turkish market in 2015 in partnership with Doğuş Hospitality & Retail Group. The Italian group moved to a master franchise business model with its Turkish partner in November 2021 and has opened 15 points of sale since 2022 with this model change, reaching 27 stores throughout Türkiye today.

According to a Euromonitor study carried out in 2022, Kiko Milano is the most popular makeup brand in Italy. Founded in 1997, the cosmetics brand offers an avant-garde range of makeup and facial and body care.

Foreign brands of cosmetic products are particularly coveted in Türkiye. While their imports reached USD 193 million in 2020, this figure rose to USD 409.4 million in 2022. Experts estimate that the amount of imports in 2023 is expected to be higher than last year. The size of the cosmetics market in Türkiye is 13 billion TL and is expected to reach a volume of 15 billion TL by the end of the year.

Source: Retail Türkiye, December 5, 2023 & Capital, November 16, 2023

Çanakkale Bridge named project of the year

The 1915 Çanakkale Bridge (Dardanelles Bridge) project was awarded the “Project of the Year” prize in the Bridges and Tunnels category awarded by the prestigious American magazine Engineering News-Record (ENR), specialized in engineering and construction.

The bridge is indeed a true technical feat. Inaugurated in 2018 after only 48 months of work, it is 3,563 meters long and has the longest main span between towers in the world (2,023 meters). It thus surpasses the Japanese Akashi-Kaikyo bridge, the previous record holder. Its 334 meter high towers dwarf iconic structures like the Eiffel Tower (320 meters) and the Tokyo Tower (333 meters).

Built by a consortium of Turkish (Limak and Yapı Merkezi) and South Korean (DL E&C and SK ecoplant) companies, this bridge reduced the crossing of the Dardanelles Strait to just 6 minutes, compared to 6 hours (maximum) previously. . With this new award, the 1915 Çanakkale Bridge has won 24 national and international awards.

For this 11th edition of the ENR Global Best Projects Awards, 31 projects were awarded a prize from more than 100 applications.

Source: Hürriyet Daily News, December 11, 2023