TODAY’S – Regional conflicts haunt Turkish economy in 2014

Regional conflicts haunt Turkish economy in 2014Turkish efforts to diversify trade partners, a goal that has been ongoing following the 2008 global financial crisis, stalled in 2014 amid regional conflicts. Since the financial crisis that erupted in the US in 2008 before affecting the global economy, the Turkish government and business groups have embarked on a campaign to diversify trading partners and decrease Turkey’s dependence on a limited number of markets.

Nonetheless, political tensions in Turkey’s region have impeded Turkish efforts to branch out into new trade markets at a desired level. 2014 was a year of new troubles in lucrative markets for Turkey, and similar problems emerged in Libya and Egypt in 2013.

A similar trend had shown itself earlier when the uprisings that began in Arab countries back in 2011 dealt a blow to Turkish exports to those markets. Almost half of Turkey’s exports go to the EU, while imports from EU countries constitute nearly 40 percent of Turkish imports.

In addition, exports to the EU have been increasing for over a year, according to foreign trade figures released by the Turkish Statistics Institute (TurkStat). In 2014, there were four significant developments that took a toll on Turkish exports: The Islamic State of Iraq and the Levant (ISIL) aance through northern Iraq, the Syrian civil war, the Russian economic crisis and the turmoil in Ukraine.

These conflicts did not just damage potential exporting markets for Turkey but are also likely to deal a blow to Turkey’s relations with its existing trade partners. In early August of this year, Economy Minister Nihat Zeybeki said the ongoing crisis in Iraq resulting from the ISIL aance could result in a $3 billion decline in Turkish exports to Iraq by the end of 2014.

Given that Iraq is Turkey’s second-largest exporting partner, the minister’s statement revealed the bleak picture drawn by the unfavorable climate next to Turkey’s borders. According to the latest figures released by Turkstat, Turkish exports to Iraq continue to fall and were down by 23 percent year-on-year in November Meanwhile, veteran economics columnist Suleyman YaIar, who has examined the effects of regional developments on the Turkish economy in light of a recent report by the World Bank, has estimated that the economic cost to Turkey of the ISIL aance and the ongoing civil war in Syria has so far totaled $12.

5 billion. Even though Turkish exports to Syria have surprisingly been skyrocketing in recent months, Turkey is worried about the future in Syria Turkey sees the regime of Syrian President Bashar al-Assad as partly responsible for the emergence of entities like ISIL by favoring other religious groups over Sunnis.

In any case, turmoil on the other side of Turkey’s border threatens possible investments in Turkey. However, the possibility of a recession in Russia due to the ruble falling against the US dollar has pushed Russian demand for Turkish products down in many sectors in 2014.

According to the Turkish Exporters Assembly (TIM), Turkish exports to Russia decreased by 15 percent year-on-year during the January-November period due to the Russian economic woes. Turkish exports to Russia mainly consist of automotive and auto-supply products, textile products, fresh fruits and vegetables, chemical products and ready-to-wear clothing.

Importantly, Russians make up the second-largest national group visiting Turkey as tourists however, the number of Russian arrivals to Turkey decreased by 18.45 percent year-on-year in November Considering that Turkey makes $32 billion from tourism revenues annually, the effect of the Russian crisis on Turkey will be severe in the summer, when Turkish beaches attract millions of tourists in just a few months.

Russia has been experiencing an economic slowdown since 2012 however, falling oil prices and Western sanctions have battered its economy further and weakened its currency. The depreciation of the ruble against the dollar has reached almost 60 percent compared to its value at the beginning of this year While the value of the ruble decreased, the demand of Russian citizens for imported products sank as well because their bargaining power has declined due to the currency woes.

Russia was the fourth-largest export partner of Turkey in 2013, but as noted in the foreign trade figures released by Turkstat, it had fallen to the seventh place by November Considering Putin’s recent statement that the crisis in Russia could last two years, the economic burden of the crisis on Turkey is likely to occupy the country’s agenda in 2015 as well. In addition, given that the international community has not yet agreed on a roadmap on how to react to the ISIL aance, the Syrian civil war and the conflicts in Ukraine, Turkey is likely to continue suffering from these conflicts next year.

SOURCE: Today’s Zaman