September 2024

The September return was particularly dynamic in the Turkish economic landscape. Türkiye's economy showed notable growth of 2.5% in Q2 2024, driven by sectors such as construction (+6.5%), agriculture (+3.7%), and ICT (+3.4%). The GDP now stands at 9,949 billion TRY, equivalent to 308 billion USD. This performance contrasts with a contraction of 1.8% in the industrial sector.

On the monetary front, the Monetary Policy Committee of the Central Bank of Türkiye maintained its policy rate at 50% for the sixth consecutive month. Although inflation dropped by 10% in August, it remains at high levels, reaching 52%, prompting the Bank to uphold a stringent policy.

In parallel, Fitch Ratings has once again upgraded Türkiye's sovereign rating, raising it from B+ to BB-, highlighting the stabilization of foreign reserves and increased monetary discipline. This revision marks the second increase in six months, reinforcing international investors' confidence in the country’s financial stability. Türkiye has also received credit rating upgrades from S&P Global Ratings and Moody's this year.

To support this momentum, the government unveiled an ambitious growth plan for 2025-2027. This program aims for a GDP growth acceleration to 5% by 2027 through economic reforms and structural adjustments. These measures include a target for inflation reduction, aiming for 17.5% by 2025 and below 10% by 2026.

Türkiye is preparing to face major economic challenges while strengthening its competitiveness through structural reforms and strict monetary discipline. This context is attracting increasing interest from investors, as evidenced by the numerous investment decisions made in recent weeks.

Economic & business news from Türkiye

Türkiye's economy grows by 2.5% in Q2 2024

The Turkish Statistical Institute (TUIK) has just released the growth figures for the second quarter of 2024 for Türkiye. The country recorded an economic performance of 2.5%. The GDP estimate based on the production method increased by 78.6% in Q2 2024 compared to the same quarter of the previous year, reaching 9,949 billion TRY, or 308 billion USD.

The sectors contributing to this growth are:

• Other service activities: 7.4%
• Construction: 6.5%
• Agriculture: 3.7%
• Real estate: 3.7%
• Information and communication activities: 3.4%
• Finance and insurance activities: 3.4%
• Public administration, education, human health, and social services: 3.2%
• Services: 2.9%
• Professional, administrative, and support service activities: 0.6%

The industrial sector recorded a contraction of 1.8%. Final household consumption expenditures increased by 1.6% compared to the same quarter of the previous year, while final state consumption expenditures rose by 0.7%. Labor costs increased by 112.4% in Q2 compared to the same period last year.

Reminder: The Turkish economy grew by 3.9% in the same quarter last year and 5.7% in Q1 2024.

Source: Anadolu Agency, September 2, 2024

Fitch upgrades Türkiye's rating for the second time

Fitch Ratings has upgraded Türkiye's sovereign rating by one notch from B+ to BB- with a stable outlook. This positive revision is the second granted by the agency to Türkiye, which had previously upgraded the country's rating in March from B to B+. This decision was motivated by the improvement in foreign reserves as the country continues a strict monetary policy to control inflation. In fact, Türkiye has raised interest rates since last year to bring down inflation, which dropped from a peak of 75% in May to 52% in August as the central bank raised the interest rate.

Fitch expects inflation to reach 43% by the end of 2024, resulting in an average inflation rate of 59.5% for the year. The average inflation is expected to drop to 31% in 2025, ending the year at 21%. The Central Bank of Türkiye anticipates an inflation rate of 38% by the end of the year. The current account deficit is expected to remain low in a context of strict monetary policy, improved export demand due to recovery in the Eurozone, continued growth in tourism revenues, and a decrease in imports of gold and consumer goods. General public debt is also expected to continue declining to 27.3% of GDP, down from 29.6% in 2023.

Reminder: Türkiye has also received credit rating upgrades from S&P Global Ratings and Moody's this year.

Source: Hürriyet Daily News, September 7, 2024

Türkiye: Launch of the TECHVISA program

Türkiye has unveiled a new visa program, the Türkiye TechVisa, aimed at simplifying work permits for foreign professionals and entrepreneurs specializing in high-value-added technology sectors. This program, developed by the Ministry of Industry and Technology in collaboration with the Ministry of Labor and Social Security, offers three-year work permits and significant incentives, such as corporate tax exemptions for companies established in technology parks or incubators, as well as income tax exemptions for employees. The initiative, which has been in preparation for two years, aims to make the Turkish entrepreneurial ecosystem more attractive by simplifying bureaucratic procedures. The program also includes legal, financial, and technical advice to facilitate the integration of newcomers.

The Türkiye TechVisa program represents an important step in Türkiye's ambition to become a global technology hub. It will play a significant role in attracting highly qualified foreign professionals and technology-focused entrepreneurs while being structured to prioritize and protect the local Turkish workforce.

Source: Daily Sabah, September 16, 2024

BRICS: Türkiye submits its application

Türkiye has officially applied for membership in the BRICS group, marking a new step in its strategy to expand its global influence. This initiative, announced ahead of the BRICS summit in Russia where expansion will be discussed, reflects Türkiye's desire to diversify its international alliances beyond its traditional Western partners. Under President Erdoğan's leadership, Türkiye aims to play a central role in a multipolar world by strengthening its relations with emerging powers like Russia and China. Membership in BRICS could enable Türkiye to position itself as a commercial bridge between Europe and Asia while accessing new funding opportunities and enhancing its global economic cooperation.

However, this rapprochement with BRICS does not imply a break with the West. Türkiye continues to seek to develop its relations with Europe by adopting a more balanced and diversified foreign policy while respecting its obligations as a key NATO member. Despite the frustration caused by the lack of progress in its long-standing efforts to join the EU, efforts to revive accession negotiations remain a strategic objective for the country, illustrating its willingness to maintain constructive dialogue with all major powers. "Türkiye can become a strong, prosperous, and influential country if it simultaneously develops its relations with the East and the West. Any other approach would only harm Türkiye," said the president.

The BRICS group, formed by Brazil, Russia, India, China, and South Africa, includes some of the largest emerging economies. Earlier this year, four new members joined the group: Iran, the United Arab Emirates, Ethiopia, and Egypt.

Source: Ekonomim, September 2, 2024

Lallemand invests in Turkish Livzym

Global fermentation leader Lallemand, through its Swiss affiliate Danstar Ferment AG, has invested in the Turkish company Livzym Biotechnologies, the first and only producer of industrial enzymes in Türkiye.

Founded in 2014, Livzym Biotechnologies has successfully developed a range of enzymes primarily aimed at food and animal feed applications, based on their mushroom-based technology platform. These enzymes are essential for reducing energy and resource consumption in chemical processes and industrial applications, thus significantly minimizing environmental impacts. The newly commissioned enzyme plant in Tuzla, near Istanbul, offers state-of-the-art enzyme production capabilities. Lallemand's investment in Livzym, along with equity raised from Turkish investors, will help finance the expansion of the Tuzla plant. The Turkish company already serves a wide clientele across Europe, Asia, the Middle East, and Africa.

As part of this strategic collaboration, Lallemand will market and distribute Livzym's enzymes to its customers worldwide and participate in cooperation regarding the development and production of enzymes in Türkiye. Lallemand Inc., a global leader in developing and producing yeast, bacteria, and enzyme-based solutions, operating in over 50 countries with more than 50 production plants and approximately 5,500 employees, views this partnership as a unique opportunity to complement its enzyme portfolio. This strategic cooperation with Livzym represents a key step in its mission to promote biotechnological solutions to address global challenges in nutrition, health, and the environment.

Source: Food Dive, July 30, 2024

Major agreement between Botaş and Shell

Turkish energy company Botaş has signed a strategic agreement with British giant Shell for the purchase of up to 4 billion cubic meters of liquefied natural gas (LNG). This 10-year contract, with deliveries starting in 2027, will allow Türkiye to strengthen its access to LNG while diversifying its gas supply sources. This agreement is part of Türkiye's strategy to become a regional gas hub, leveraging its terminal and pipeline infrastructures. A key objective is to offer natural gas at more competitive and accessible rates for citizens and industry.

As part of this diversification, Botaş is multiplying partnerships: in May, a similar agreement was signed with ExxonMobil, and long-term contracts with Oman and Algeria are already in place. Türkiye is also continuing its exploration and production efforts, with Ankara already conducting several exploratory drilling operations in the Black Sea and the southeastern part of the country.

Source: Agbi, September 3, 2024

Investment in Lithium-Ion Batteries - Major Strategic Agreement of $500 Million

Ganfeng Lithium, one of the world's largest lithium battery producers, has signed a major agreement with Yiğit Akü, Türkiye's leading battery manufacturer, to invest $500 million in a lithium battery production plant in Türkiye. This plant, which will have an annual capacity of 5 GWh, will produce batteries for key sectors such as energy storage, electric vehicles, and telecommunications. The objective of this major strategic agreement is to increase lithium-ion battery production capacity in Türkiye and meet the needs of the Turkish and European markets. A market study on lithium-ion batteries indicates that the global market will reach a compound annual growth rate (CAGR) of 15.70% between 2023 and 2030, growing from $50 billion in 2022 to $188 billion by 2030. The Turkish energy storage market is expected to require approximately 120 GWh within the next three years. A research and development center will also be established to explore innovative technologies, such as solid-state batteries, and applications in maritime and aerospace sectors. The joint venture aims to primarily target the European market while benefiting from incentives offered by the HIT-30 program in Türkiye. This investment is part of a long-term strategy to enhance global competitiveness in the energy market while fostering technological innovation in Türkiye.

Based in China, Ganfeng Lithium is a key player in the battery sector, integrating the entire supply chain: extraction, refining, production, and recycling of lithium batteries. The company is valued at $26 billion and supplies batteries to giants like Tesla, BMW, and LG.

Founded in 1976 in Ankara, Yiğit Akü is one of the largest battery producers in Türkiye. The company serves over 500 clients in 100 countries, with an annual production capacity of 7 million batteries. Since 2013, Yiğit Akü has also ventured into lithium-ion battery production.

Source: Ekonomim, August 16, 2024

Brazilian WEG Acquires Volt Electric Motor

Brazilian WEG has announced the signing of agreements to acquire Volt Elektrik Motor San. ve Tic. A.Ş., a Turkish manufacturer of industrial and commercial electric motors, a subsidiary of the Saya Group. The acquisition is valued at $88 million. With this acquisition, the Brazilian company aims to strengthen its presence in the region and diversify its industrial activity to serve Türkiye and Europe.

Founded in 1987, Volt is a vertically integrated company with a production capacity of one million motors per year. The company holds a strong position in the Turkish market and exports to several countries, mainly in Europe, the Middle East, and Central Asia.

With this agreement, WEG is reinforcing its presence in Türkiye, where it had already launched its own operations in 2022, by taking full control of Volt, which has a 27,000 m² factory. WEG will also integrate a team of 690 employees. In 2023, Volt achieved a net revenue of $70 million, with an EBITDA margin of 18.5%. This acquisition aligns with WEG's growth strategy as it will expand its presence and product offerings in highly competitive and strategic markets. In addition to a strong presence in Türkiye, Volt is well-positioned to access regions with potential demand for WEG's products and services, such as Eastern Europe, the Middle East, Central Asia, and North Africa. Volt's location in Izmir is a significant logistical advantage, facilitating WEG's access to these markets by both land and sea.

The finalization of the transaction is subject to obtaining the necessary regulatory approvals related to the operation.

Source: Ekonomim, August 16, 2024

Mubea Opens Its Second Factory in Türkiye

Mubea, one of the leading global suppliers to Airbus, is strengthening its presence in Türkiye by inaugurating its second factory in the European free zone (ASB) in Ergene (Tekirdağ). This new strategic investment of €44 million triples the company's production capacity in Türkiye, with a new 17,000 m² factory dedicated to manufacturing critical components for the Airbus A320, A330, and A350 models. Over 250 new jobs have already been created. The objective of this investment is to generate a revenue of €40 million as early as next year.

Meanwhile, Mubea's other factory in Türkiye, dedicated to the production of composite parts, has also benefited from an investment of €6 million. A third factory is already in preparation on a 10-hectare plot, consolidating Türkiye's position as a leading industrial hub for the German giant.

This massive investment has also been motivated by positive feedback regarding the favorable working conditions in Türkiye, as well as the availability of a qualified and highly motivated workforce.

Mubea is a family-owned German company, a leader in the automotive and aerospace sectors, with over 17,000 employees and a total revenue of €4 billion. Since entering the aerospace industry in 2018, Mubea has rapidly gained importance, reaching €450 million in revenue in this sector and ranking among the top 100 global suppliers.

Source: Ekonomim, September 12, 2024

Felix Schoeller Opens a Competence Center in Türkiye

With revenue exceeding one billion euros, Felix Schoeller is taking a significant step by opening a Competence Center in Istanbul. Scheduled to be operational by January 2025, this new center will better address the needs of clients in the Middle East by offering a comprehensive range of services for its high-quality specialty papers.

Since 1895, this German family-owned business, one of the world’s leading producers of photographic paper, has adapted to technological changes. Today, Felix Schoeller stands out as one of the three largest European manufacturers of decorative and specialty papers. Present in 17 countries with around 4,000 employees, it produces paper products ranging from flexible composites for packaging to materials for the furniture industry.

As Matthias Breimhorst, head of Felix Schoeller, explains: “Thanks to our global production network, including joint ventures in China and India, we offer innovative and practical solutions, thus creating real added value for our customers. The new center in Istanbul will play a key role in this approach.”

Source: Dünya, September 18, 2024

Türkiye: $200 Million Investment in a New Factory

Turkish company Gürok Grup is entering the fast-moving consumer goods sector with its new mineral water brand AVOYA. With a colossal total investment of $200 million, the company has launched the first phase of its production plant located in Burdur (Southwest Türkiye) on an area of 125,000 m². It aims for an annual production of 250 million units by 2025. Ultimately, the goal is to establish a facility with a production capacity of 2.5 billion bottles over a ten-year period.

The AVOYA brand will offer an innovative range of beverages, including natural mineral waters and enriched versions of juices and plant extracts, aiming to be present in 40,000 retail points in Türkiye by the end of 2024.

With products sourced from the richest magnesium and mineral springs in Türkiye, AVOYA also aims to conquer international markets. In 2025, the brand plans to export to priority countries such as Spain and the UK, with an expansion goal to 40 countries within five years. The factory utilizes advanced technologies, automated processes, and eco-friendly initiatives to reduce water consumption and use recyclable packaging.

According to the group, the mineral water market in Türkiye presents immense growth potential, with increasing demand for healthy and natural beverages; the Turkish mineral water market is estimated to represent 1.5 billion liters, with a growth potential ten times greater than in Europe.

Founded in 1948, Gürok Group is now one of the largest groups in the Turkish private sector. Present in various sectors (table glassware, glass packaging, ceramics, tourism, construction), the group reported a revenue of 4 billion TL in 2022 and employs over 4,500 people.

Source: Dünya, September 16, 2024

Inauguration of Türkiye's 58th Airport

The new Çukurova International Airport (COV) was inaugurated this summer, marking a key milestone for regional growth and international connectivity in the southern region of the country.

Located between Adana and Mersin, the new air hub is the 58th airport in Türkiye. It is easily accessible from major highways and will be integrated into high-speed train networks. Local businesses, particularly agricultural producers, will benefit from direct and rapid access to global markets. It is primarily expected to serve the southern region, including the provinces of Adana, Mersin, and Osmaniye.

Key figures for the new airport include:

• Annual capacity: 9 million passengers
• Terminal area: 110,000 m²
• Two runways, one of which can accommodate the largest aircraft
• State-of-the-art infrastructure: expressways, parking areas, and freight facilities

The COV is expected to benefit the regional economy, creating around 3,000 direct and indirect jobs while promoting the growth of trade, tourism, and agricultural production.

Source: Invest in Türkiye, September 5, 2024

Wind Energy: EBRD Grants $60 Million Loan

The European Bank for Reconstruction and Development (EBRD) announced on Monday the approval of a $60 million loan to Borusan EnBW Enerji in Türkiye to finance the development and construction of a 116-megawatt (MW) onshore wind power capacity in the provinces of Sivas and Tekirdağ. This loan plays a crucial role in combating climate change and expanding renewable energy capacity in the country. This project is a vital lever enabling Türkiye to achieve its climate goals and reduce CO2 emissions. Additionally, it fully aligns with the EBRD's strategy to support projects related to energy efficiency and renewable energy in Türkiye.

This investment is expected to create about 1,400 jobs during construction and approximately 60 permanent jobs. Borusan EnBW Enerji operates several renewable energy plants in Türkiye, with a total installed capacity of 1,030 MW, including wind and solar energy.

Source: EBRD Press Release, September 22, 2024