The widening exchange rate-inflation gap, rising input costs and loss of competitiveness had a negative impact on export orders. While orders declined in the locomotive sectors of exports, expectations were also lowered. Exporters do not expect a record in the remaining 4 months of the year, but predict a decline.
Exporters, who say they lost their competitive advantage with the widening exchange rate-inflation gap, failed to achieve the expected growth in exports last year. The export sector, which reduced the export target of USD 267 billion stated in the Medium Term Program (MTP) this year to USD 264 billion with the renewed MTP, estimates that it may be a figure below this target.
The biggest danger is in long-term orders. Nail Olpak, President of the Foreign Economic Relations Board (DEİK), who drew attention to the danger in exports in his statement to the EKONOMİ daily last month, said that they had heard of declining orders in locomotive sectors such as automotive and chemistry. Likewise, Mustafa Gültepe, President of the Turkish Exporters Assembly (TİM), had pointed out in a meeting with the economic press that small-scale companies were losing customers due to the disadvantage created by price competitiveness and that export targets would be below the year-end targets.
When we look at the last 5 years of Turkey’s exports, there is an increase in terms of revenue, except for the pandemic year. In 2023, when the inflation-exchange rate gap was felt, the increase was quite limited. Exporters managed to maintain the current level last year. There is a similar situation in quantity-based exports. The quantity data reflecting the orders received by Turkey fell sharply last year, from 165 million tons to 149 million tons. During this period, the average export price per kg increased from USD 1.53 to USD 1.71, while input costs such as labor and energy were reflected on prices. In the 8-month period of this year, there is a recovery in terms of quantity, but TurkStat’s data pointed to a decline in profitability. In the export unit value index announced by TurkStat for July, the quantity index increased by 12.8 percent compared to the previous month, while the unit value index increased by 0.9 percent. Therefore, more products were sold at a cheaper price.
Exporters attributed the decline in value to the loss of price competitiveness and said that price cuts were made in order to overcome the difficult period in the economy and not to lose customers. According to the information provided by the exporters who made a statement to EKONOMİ daily, orders will decrease in the remaining 4 months of the year. Accordingly, a decline in overall exports is also expected.
Locomotive sector downsizes target
Stating that increasing input costs and the widening exchange rate-inflation gap following the real appreciation of the TL had a negative impact on price competition, Baran Çelik, President of the Uludağ Automotive Industry Exporters’ Association (OIB), said that the fight against inflation was indispensable and that they estimated that this troubled period would not last long. Noting that there is a loss of strength in new product groups and the competitiveness of the supply industry, Çelik said, “We were at the fair in Germany last week, exporters frequently mention these problems, they say that they cannot get new orders. If medium and large-sized companies can convince their customers, they can get new projects. However, small-scale companies have more problems. We are currently unable to use even the investments made in the past at full capacity. There is no suitable environment for new investment plans.”
Reminding that they set their export target at the beginning of the year as USD 39 billion, Çelik said, “With the loss of competitiveness, it seems that it will remain in the USD 35-36 billion band. The priority is to reduce inflation, and if the interest rate falls with it and the exchange rate increases slightly, it will bring back competitiveness. But it does not seem to bring a huge competitive advantage this year. If inflation reaches 25-26 levels, there is hope for a competitive environment. For 2025, if we can maintain the current competitive environment, it will be a success.”
Inflation hits chemical imports as well
Stating that there are many different business lines in the chemical products sector, Saadettin Çağan, President of the Mediterranean Chemicals and Chemical Products Exporters’ Association (AKMİB), underlined that although large-scale companies can somehow carry out their business, the business of small-scale companies has become more difficult. Underlining the decline in profitability in the sector, Çağan said, “At the beginning of the year, we were expecting a 10-15 percent growth in exports, but we will remain below this target. We are suffering the penalty of the inflationary process and the wrong policies made in the past. We have become quite expensive, it has become difficult to sell. In order to reduce production costs, the process of investing and researching in Egypt and other African countries has started. Sustainable exports are not possible unless inflation falls. In the new year, labor wages will increase, general expenses will rise, and we will remain expensive. A competitive environment cannot be created in the market as labor force. 2025 will be more painful.”
Minimum wage won’t help either
Burak Sertbaş, President of the Aegean Ready-to-Wear and Apparel Exporters’ Association (EHKİB), said that there is no indicator that will close the wounds that exporters have received from the past under the current conditions: “Now we have turned our eyes to the minimum wage. 40 percent increase has started to be pronounced. We do not know how we will meet this increase. Our only way out is for the European market to regain its appetite and demand more. It seems there is no other exit point than that. If we could meet the current prices, there would be a lot of orders. But we are not in a position to give the price they want. There is a 20-30 percent price difference with Far Eastern producers. 2025 will be as cautious as 2024. We will last as long as we can. Those who don’t are slowly quitting the business anyway. However, if the growth rates in Europe are realized and the market revives, business may improve in 2026. In this period, we expect government support for exports to at least stay in place, let alone increase. Even if the 2 percent foreign currency conversion support is 5 percent, it would be a breath of fresh air.”
Decline in long-term orders
Stating that there are changes in exports on the basis of sectors and product groups, Central Anatolian Exporters’ Associations (OAİB) Coordinator President and Air Conditioning Industry Exporters’ Association (İSİB) President Mehmet Şanal continued as follows: “In general, we are below our targets. We say it is good if we can match last year. We had targeted 8 percent growth for this year, but it seems difficult. Increasing costs and exchange rate policy affect exports negatively. We see a decline in long-term orders. We estimate that 2025 will be a challenging year for air conditioning, and our other unions are experiencing similar problems. Exporters have common problems. We are experiencing price fixing problems. We say it is good if we can maintain the current situation. We were hopeful when the OVP was published, but it is important to be able to take action, not to create reports. I hope we will be successful and the export climate will turn positive again.”
Electronics exports remain positive despite challenges
Emphasizing that there is no company in the market that does not complain about the widening gap between the exchange rate and inflation, Mehmet Kavaklıoğlu, Vice President of the Electrical and Electronics Exporters’ Association, stated that unit costs are increasing day by day on a foreign currency basis. Pointing out that although the process is difficult, there is no decrease in export figures with a contrasting situation, Kavaklıoğlu made the following statements: “There is no decrease in our capacity utilization rates. We are at the break-even point in exports compared to last year. We are increasing in electricity distribution equipment and cables, and we are stable in white goods and consumer electronics. We will close 2024 with an increase. If the current conditions continue, we expect 3 percent growth next year, but if the exchange rate-inflation gap closes, we will get a better result.”
“We sell at a loss to avoid losing customers”
The total exports of the ferrous and non-ferrous metals sector, one of the most important sectors for Turkish exports, lost 5.73 percent between January 1 and September 9 compared to the same period last year. The decline in unit prices played an important role in this decline. When the sub-sectors are analyzed, the biggest decrease in unit prices was seen in the hardware sector with 12.40 percent, followed by aluminum with 8.53 percent. Noting that their only goal is not to lose customers and markets in this period, exporters said, “We are doing more business than last year, we sell more in tonnage in some sectors, but there is no profit. Unprofitability is at its peak in the sector right now. Exporters are selling at a loss in order not to lose their customers, everyone is making losses.”
