Our comprehensive assessment of Turkey's operating environment and the outlook for its leading sectors are formed by bringing together a wealth of data on global markets that affect Turkey, as well as the latest industry developments that could impact Turkey's industries. This unique integrated approach has given us an impeccable track-record for predicting important shifts in the markets, ensuring you’re aware of the latest market opportunities and risks in Turkey before your competitors.

Country Risk

Turkey Country Risk

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Core Views

  • Although we view positively Turkey's long-term growth outlook, we expect slower, more balanced growth in the next decade relative to the previous one. This will result from less abundant foreign capital inflows and slower domestic credit growth.

  • Political uncertainty and social tensions will rise in the run up to general elections in 2015, further weighing on business and consumer confidence.

  • The government maintains a conservative fiscal policy with healthy budget and debt dynamics. However, recent populist policy initiatives lead us to question the government's long-term commitment to conservative fiscal management.

  • While the government's debt load is low by regional standards, the private sector's rampant external borrowing in previous years has greatly increased macroeconomic risks.

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Turkey Operational Risk Coverage (9)

Turkey Operational Risk

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BMI View: Turkey's labour market inhibits the business environment due to the low skill level of the labour force and limited participation, particularly among females . In addition, labour force participation is yet to recover its pre-2008 crisis peak. This means that Turkey is currently unable to harness its favourable demographic situation by turning its large, young population into skilled workers. Consequently, businesses face a heightened need to import foreign pr ofessionals and provide additional training for Turkish employees, which entails additional costs and bureaucratic obstacles. Nevertheless, for businesses willing to...

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Turkey Crime & Security

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BMI View: Turkey is generally a safe place for foreign business travellers, tourists and expatriates. Although Turkey's overall Crime And Security Risk score is depressed by a relatively high terrorism threat and tense relations with its neighbours, these risks do not pose a great threat to foreign businesses. Turkey scores 39. 2 out of 100 in our overall Crime and Security Risk I ndex, placing it 20th out of 29 countries in the Emerging Europe region.

The most pronounced crime and security risk to business operations in Turkey is from terrorism. Turkey's domestic...

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Turkey Labour Market

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Turkey's labour market inhibits the business environment due to a general lack of education among the workforce and low levels of participation in the formal labour market, particularly female participation. In addition, labour force participation is yet to recover its pre-2008 crisis peak. This means that Turkey is currently unable to harness its favourable demographic situation by turning its large, young population into skilled-workers. Consequently, businesses face a heightened need to import foreign professionals, which increases risks of additional costs and bureaucratic obstacles. Considering these factors, BMI awards Turkey a score of 55.3 out of 100 for overall Labour Market Risk. This equates to 18 th place out of the 30 countries in Emerging Europe, between Azerbaijan and Croatia.

Risks associated with the availability of labour are pronounced in Turkey. At 29.4%, Turkey has the lowest rate of...

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Turkey Logistics

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BMI View: Turkey offers investors a more highly developed logistics network than most of its peers in the Emerging Europe region. The country's international trade links and port facilities are highly developed, facilitating efficient supply chains for the country's key manufactured goods exports. Investment in inland transportation options will enable the network to cope with growing trade volumes. Consequently, Turkey is ranked third out of 30 states in Emerging Europe in the BMI Logistics Risk Index, with a score of 63.1 out of 100. Although the utilities network offers relatively good reliability, the reliance on fuel imports exposes electricity and diesel supplies to disruption due to geopolitical risks. In addition, water scarcity is becoming an increasingly pressing issue, and will deter investment in water-intensive industries.

Investor sentiment towards Turkey has improved...

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Turkey Trade & Investment

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BMI View: Despite having a relatively open trade and investment environment, and welcoming foreign direct investment (FDI) in almost all sectors of the domestic economy, Turkey underperforms in the BMI Trade and Investment Risk Index. This is largely due to high levels of corporation tax, declining exports and curtailed press freedom. These are the principal drags on Turkey's score of 58.2 out of 100 for Trade and Investment Risk, which places the country 15th in E merging Europe, between Romania and Serbia.

Turkey performs most strongly on the Legal Risks pillar of our Trade and Investment Risk Index. The country's score here is boosted by comprehensive intellectual property rights (IPR) legislation for financial assets, which increases the country's...

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Turkey Industry Coverage (25)

Agribusiness

Turkey Agribusiness

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Agribusiness Market Value
BMI Market Value By Commodity (2010-2018)

BMI View: We favour the sugar sector in Turkey because of the strong growth potential of the country's confectionery industry and our belief that large changes to the country's sugar production quotas are likely to occur in the coming years. We see upside potential in the livestock sector, as the government's supply of discounted credit has aided growth in recent years. We see some growth potential for the grain, dairy and rice sectors, though we...

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Autos

Turkey Autos

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A sharp decline in commercial vehicle (CV) manufacturing resulted in a decline in Turkish vehicle production of 1% year-on-year (y-o-y) in the first eight months of 2014, to 719,501 units. A surge in passenger car output during this period was not enough to arrest this decline. BMI forecasts a 0.5% increase in total vehicle output in 2014 due to sustained growth in the passenger car segment and a modest recovery in CV production.

BMI maintains a bullish view on the country's autos exports outlook following an increase in vehicle exports in 2014 to date of 5% y-o-y, to 569,973. This reflects the European passenger car market's resurgence from a period of marked declines, and sustained currency weakness which makes Turkish exports more competitive. Furthermore, a number of auto manufacturers have invested in the country for export.

Despite the growth in passenger car...

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Commercial Banking

Turkey Commercial Banking

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...
Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

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Consumer Electronics

Turkey Consumer Electronics

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BMI View: Turkey's Consumer Electronics market is considered to have a strong medium -term growth outlook, as a convergence of broad based income growth, globally declining device prices, improvements to supporting infrastructure and expanded domestic production drive market development. However, there is significant downside to our core scenario as Turkey continues to be among the European markets most exposed to downside risk. For instance, Turkey continues to be dependent on external financing, which leaves domestic credit growth exposed to international sentiment   and this is a particular concern given the importance of credit as a driver of Turkey's economy. ...

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Defence & Security

Turkey Defence & Security

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BMI View: On the whole, Turkey is one of the more stable countries in the Near East region. That said, the instability in its surrounding neighbourhood is affecting Turkey's regional interests. BMI thinks that international dynamics are bringing Turkey to roll back somewhat its Syrian policy, notably through modification of its previous support of extremist groups in the region. Turkey is continuing its efforts to boost its indigenous defence production capacity are continuing via investments, joint ventures with international companies. From the BMI perspective, Turkey could serve as a potential market to opt for cheaper offshore production processes, although caution is necessary.

We expect that Turkey will spend up to USD20.6bn on defence in 2014. Up to and including 2019, we expect Turkey to spend an average of USD28.4bn on defence annually. We anticipate that...

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Food & Drink

Turkey Food & Drink

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BMI View:   We hold a below-consensus view on the Turkish consumer and Turkish economic growth. We believe that growth will slow sharply over the next several quarters, spearheaded by the decline in consumption expenditure. We forecast private consumption growth to grow by 0.6%   in 2014, from 4.6% growth in 2013, and to be the primary driver of weak headline GDP growth. The main factor behind this decline will be the dramatic slowdown currently underway in all segments of consumer credit growth, a trend that shows few signs of abating anytime soon.

That said, we do not believe food consumption growth in Turkey will be drastically affected. We hold this view due to the fact that the slowdown in private final consumption in Turkey will be fuelled by the decline in credit purchases, which typically does...

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Freight Transport

Turkey Freight Transport

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Following a year in which BMI saw increasing volumes across Turkey's freight transport sector, 2014 will signal further growth in line with our macroeconomic forecasts for the country. 

Total trade is projected to pick up with our Country Risk desk forecasting a year-on-year (y-o-y) increase of 4.0% in 2014 following a growth of 4.33% in 2013.

Road freight is to continue to dominate the sector and is projected to grow by 4% in 2014. The mode has made a prompt recovery from the downturn and enjoys the benefits of not having to make any reductions in road haulage volumes, such as those pledged by the neighbouring EU.

Growth in rail freight volumes will be helped by the Marmaray rail tunnel under the Bosphorus Strait, which was opened in 2013.

The throughput at the Port of Ambarli, one of Turkey's largest ports, is set to continue strong growth in terms...

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Information Technology

Turkey Information Technology

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BMI View: O ur core scenario for Turkey is bullish over the medium term as a convergence of income growth, declining device prices, inward investment and domestic modernisation initiatives drive demand growth.   Turkey has seen foreign investment in ICT rise over the last three years and it is increasingly viewed as a regional hub, with a strategic geographical location. Meanwhile, the government will also be a positive factor through a supportive policy umbrella and its goals for Vision 2023.   However, there exists significant downside risk, from both the vulnerability of the economy to external shocks and the increasing concerns about the domestic political situation. Internet censorship is a growing characteristic of the Erdogan administration and could put off some investors...

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Infrastructure

Turkey Infrastructure

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BMI View :  A buoyant pipeline of projects ,   government guarantee s for investors and a wave of planned privatisations bode well for growth in Turkey's construction and infrastructure sector.   However, f inancing risks have grown over the past year , which we believe will dent growth over the longer term. We note that Turkey will remain one of the most attractive markets in the region   in spite of this .  

There continues to be downside risks to Turkey's healthy...

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Insurance

Turkey Insurance

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BMI View: Turkey ' s insurance sector is unlikely to realise its full potential until the structural impediments to the growth of life insurance are removed. Downwards pressure on prices for motor vehicle insurance is likely to be a challenge for much of the forecast period as well.

Along with Colombia, Mexico, Thailand and Indonesia, Turkey stands out globally as a major emerging market whose insurance sector is already large in absolute terms and which should achieve superior growth rates over the coming five years. Many of the leading companies have a presence in the non-life segment, the life segment and the pensions sub-sector. The leaders themselves are either affiliates of the main banking groups in Turkey (TC Ziraat Bank, Garanti Bank, Is Bank, Akbank and Vakifbank) or subsidiaries/associates of major multi-national companies. These two...

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Medical Devices

Turkey Medical Devices

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Espicom Industry View: The Turkish medical device market is expected to grow by a CAGR of 3.4 % over the 2013-2018 period, driven by import growth, the expansion of healthcare facilities , including the large city hospital complexes, and rising health expenditure. The market is largely supplied by imports but its reliance on medical devices manufactured outside of the country should reduce if the government is successful in implementing a project that is intended to boost the domestic production of diagnostic medical devices and other medical equipment.

Headline Industry Forecasts

  • In 2013, the Turkish medical device market was estimated at US$2,421.6mn, or US$32 per capita. This total was almost twice the size of the Czech market; in per capita...

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Metals

Turkey Metals

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BMI View: Despite relatively weak growth to be expected over the coming months , the medium-term outlook for Turkey's metals sector remains promising due to strong demand from the domestic construction and autos sectors. Near-term headwinds are likely to include currency weakness making imports of materials more expensive and weak global steel prices sq ueezing steel-makers' margins. Long-term political risk in Turkey also presents a key downside risk.

Over the medium-term we forecast Turkey's total steel production to grow from 34.7mnt in 2013 to 44.6mnt in 2018. We expect growth to average 5.2% y-o-y over 2014-2018, as we predict a recovery from the negative growth seen during 2013, which was a result of...

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Mining

Turkey Mining

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BMI View: Turkey's mining industry is set to be on the radar of foreign investors in the years to come as the government has undertaken efforts to open up the sector , paving the way for forthcoming investment. The gold sector will attract the largest share of investment as several companies bring their projects into production. Nevertheless, Turkey's extremely poor mining safety record and weak global commodity prices will limit the industry's otherwise healthy growth.

We believe investment into Turkey's mining sector will be forthcoming over the coming years as Prime Minister Tayyip Erdogan pledged to transform the country into one of the 10 biggest economies by 2023. With more...

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Turkey Mining

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BMI View:   We expect to see strong growth in the mining sector of the Middle East and North Africa over the coming years. With low base effects, governmental will to increase non-oil revenues and significant resources it appears the region is set for strong growth. We highlight Turkey and Northern Iraq as key areas for growth. That said, the region will remain peripheral in the global mining sector as it continues to underperform due to political instability in much of the region.

The key issue in the Middle East's mining sector presently is Iran's ongoing negotiations with Western powers. Our core scenario is for negotiations to continue and for limited sanctions relief to be rolled over until 2015. This will benefit the mining sector as it is one of the beneficiaries of an easing of sanctions. On the upside, if negotiations are successful (which we currently give a...

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Oil & Gas

Turkey Oil & Gas

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BMI View: Turkey will remain heavily dependent upon oil and gas imports for the foreseeable future. Phase II of Shah Deniz and t he decision to proceed with the TAP and TANAP natural gas pipelines will cement Turkey's position as a critical transit country . . There is upside potential to domestic energy production   from the Black Sea and unconventional development s , although it remains too   early  ...

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Petrochemicals

Turkey Petrochemicals

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BMI View: Domestic polymer markets experienced a downturn in Q414 and there are many downside risks in the short-term, but BMI 's latest Turkey Petrochemicals Report does not envisage investment programmes being knocked off course in the long-term.

The import dependent market ensures that Turkey will remain a significant polymer market, but demand trends will influence the performance of imports. But as an export-oriented industrial producer, the performance of the EU market will be crucial to the structure and dynamism of petrochemicals demand. As such, a slowdown in the EU will have knock-on effects on Turkish imports.

The rate of growth on the Turkish petrochemicals market will probably remain subdued, particularly if the eurozone's lacklustre performance continues. The major depreciation in the lira is making the cost...

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Pharmaceuticals & Healthcare

Turkey Pharmaceuticals & Healthcare

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BMI View:   Despite a challenging pricing and reimbursement situation compounded by currency uncertainty, BMI still believes the Turkish pharmaceutical market is an attractive long - term prospect as higher y ear -o n -y ear growth rates will return from 2015 . In contrast to European markets where manufacturers can expect to achieve higher prices, but with a stagnant growth outlook, Turkey offers strong growth potential if drugmakers are able to accept prices that are considerably...

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Power

Turkey Power

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BMI View:   Ove rall, we maintain our view that   Turkey's position in the region as a key power market over the coming decade will get increasingly more important , accounting for nearly one- fifth of t he CEE's total capacity by 2023 .   Private investor interest in Turkey's power market is expected to continue to attract interest from a host of international companies and it has yet again maintained its position in our Power Risk/Reward Index (RRIs) as the most attractive market in CEE . T...

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Real Estate

Turkey Real Estate

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BMI View:   Turkey's commercial real estate market has upheld its reputation as of the strongest perform er in Europe , with growth following an upward trajectory spurred on in particular by a blossoming retail sector. The industrial segment continues to underperform in terms of rent, yields and construction growth ,   but with growth expected in exports there is hope that the sub-sector can return to growth.

With a focus on the two principal cities of Istanbul and Ankara, this report covers the commercial real estate market's performance in terms of rates and yields, with a focus on office, retail and industrial real estate.

...

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Renewables

Turkey Renewables

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BMI View:   Turkey's renewables industry is set to expand rapidly over the coming decade and efforts to cut domestic reliance on gas could create even more momentum in the wind sector - which we have previously highlighted as a global renewables 'brightspot'. We also see significant growth potential in Turkey's nascent solar sector, in line with the government's push to improve its energy security situation.

Despite the dominance of thermal generated electricity, Turkey's renewables sector presents significant growth potential across most technologies, including wind, geothermal and solar power. Turkey has made impressive progress with its renewable energy expansion over the last decade, and across both Western Europe and Central and Eastern Europe (CEE), we see Turkey emerging as a key market; with strong project pipelines, robust growth potential and relatively...

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Retail

Turkey Retail

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BMI View: After contracting in 2014, Turkey ' s economy will start rebounding in 2015 and is expected to grow throughout the forecast period. The lack of optimism will not obstruct the growth of total household spending which will reach 5%-7% annually for our forecast period. Turkey boasts one of the largest working populations in Europe and has one of the most optimistic demographic prospects in the continents, however, it is also highly vulnerable to both domestic and international political tensions. BMI forecasts that only political instability has a potential to negatively affect country ' s retail sector, along with its whole economy.

Recep Tayyip Erdogan was elected to become the 12 thPresident of Turkey in August 2014. He has been a...

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Shipping

Turkey Shipping

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Late last year we outlined nine key themes for Emerging Europe in 2014, two thirds of which have already played out (or are currently playing out). Of the remaining views, we believe one - Turkey's growth slowdown - is still likely to occur by year-end, while the other two - populism in EU elections and modest attempts at liberalisation of the Russian economy - appear wrong.

The Turkish economy has proved more resilient than we initially anticipated, with real GDP growth coming in at 4.3% y-o-y in Q114. However, the trends we expected are playing out, and with substantial headwinds still facing the Turkish economy we still expect a more pronounced slowdown in the coming quarters. Domestic demand growth was very weak in Q114, with net exports and a substantial contribution from government expenditure propping up the headline figure. Private consumption growth fell to its lowest level since 2012, and we see further downside as consumer credit...

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Telecommunications

Turkey Telecommunications

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BMI View:   T he   Turkish telecommunications market has been a regional outperformer 2011-2013 , however there is increased downside in 2014 arising from the interference of the government with bans on both Twitter and YouTube in early 2014 , as well as pressure on operator financial performance . Despite this challenge the market remains in good health with strong growth in fixed and mobile broadband subscriptions, as well as pay-TV subscriptions in 2013. The mobile market is more volatile, with IP voice and messaging substitution beginning to...

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Tourism

Turkey Tourism

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BMI expects healthy growth in Turkey's tourism industry, as we forecast positive developments across all of the country's key indicators for tourism between 2014 and 2018. Some domestic and regional risks remain around security issues, but our confidence in the future of the market is reinforced by a swathe of new hotel developments across the country.

We expect to see a boost to arrival numbers of about 5mn between 2014 and 2018, taking the number of journeys to Turkey in 2018 to 39.3mn. This will be due to economic growth and increased consumer spending across most of Turkey's key source markets for arrivals, as well as continued investment in tourism and transport infrastructure in the country and the prospect of the effective marketing of Turkey's many tourism assets. Arrivals may also be boosted by travellers avoiding other unstable destinations in the Middle East and North Africa due to security concerns, as well...

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Water

Turkey Water

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BMI View: We believe the ongoing drought, the reduction of the water resources, and the rising demand for thermal electricity generation pose serious risks to the Turkish water sector. Moreover, continued regional tensions between Turkey and its neighbours concerning the former's extensive dam construction and the latter ' s calls to slow or even halt construction of many of Turkey's water infrastructure projects will have a long-term impact on the sector.

Overall, Turkey has an open trade and investment environment and actively encourages foreign investment however waning investor interest is acting as a drag on FDI levels Turkey has seen a sharp drop-off in FDI into the water sector since 2012. In 2010 it had the third largest level of FDI into water collection, distribution...

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