Europe’s largest furniture fair opens its doors in Istanbul on January 23rd. Ahmet Gulec, President of Federation of Furniture Associations (MOSFED), the main supporter of Istanbul Furniture Fair, said, “The fair is a great opportunity to increase our market share in the world. It is also an incubator event for our manufacturers who are new to exports or want to start exporting.”
MOSFED President and TIM Vice President Ahmet Gulec, one of the most active names and public faces of the furniture sector, evaluated the sector and the fair to EKONOMİ newspaper ahead of the Istanbul Furniture Fair.
Gulec said that they expect a transaction volume of USD 3 billion at the fair and added that the fair is not only a trade meeting but also a great opportunity to strengthen the perception of Turkish furniture. Stating that Turkey’s furniture exports, which were around USD 250 million in 2001, increased 21-fold since then. “Our share in the world market was 0.03 percent in 2001, now it has increased to 1.8 percent; in other words, it has increased by 6-fold. We should look for ways to increase this 1.8 percent to 18 percent.”
Güleç answered the questions of EKONOMİ newspaper.
What are your expectations about the fair?
Istanbul Furniture Fair is our pride. The fair is the biggest in Europe. It is the third-biggest fair in the world. It is also the biggest fair among all sectors in Turkey. More than 3000 local and foreign manufacturers will exhibit their products. We expect more than 200 thousand visitors, 30 thousand of them from abroad, and a transaction volume of nearly USD 3 billion. Istanbul Furniture Fair should not only be seen as a trade meeting. It is a great opportunity to strengthen the perception of Turkish furniture in the world and increase our world market share. It is also an incubation event for our manufacturers who are new to exports or want to start exporting.
SECTORS WHERE WE ARE WEAK AND STRONG SHOULD BE SUPPORTED WITH DIFFERENT TOOLS
2023 was not a very good year for the global economy. How was it for the Turkish furniture sector?
First of all, I would like to say this. We are one of the most competent countries in the world in both production and design. We are one of the sectors that made the biggest breakthrough in exports in the long term. Furniture is one of the sectors that contributes the most to Turkey’s promotion abroad. Houses in around 200 countries use the products we produce. We are a sector that is the engine of growth with the number of domestic companies, employment and other sectors we affect. In other words, the furniture sector is one of Turkey’s sectors to be proud of. There is a difference in practice between other countries and Turkey. In Turkey, we usually try to support and strengthen the areas where we are weak. However, in areas where we perform well, we do not provide support to get stronger and move forward. Other countries support both their weak areas and their strong areas. But they do both with different tools. This is what we need to do in Turkey.
Let me explain what I mean with some data: Turkey’s furniture exports, which were around USD 250 million in 2001, increased 21 times since then. Our share in Turkey’s exports was 8 per thousand, almost tripling to 2.3 percent in 2022. It declined to below 2 percent in 2023. Our share in the world market was 3 per thousand in 2021, now it has increased to 1.8 percent; in other words, it has increased 6-fold. As a country, we do not have the luxury to say “Furniture is already doing well, let’s support other sectors”. Let’s consolidate this momentum while we have it. We have reached 1.8%, how can we reach 18%?” and we should work towards this goal.
Now back to your question. During the recovery period after the pandemic, we had a good year in 2021 and 2022. In 2022, we increased our exports by 11.2% to USD 4.7 billion. Three main negativities affected our sector in 2023: First, the sad earthquake disaster we experienced in the first months of the year. The earthquake region was a region where furniture production and exports were intense, and the disaster caused a decline in the region’s exports for several months. The second is the slowdown in growth in the world economy and in our target markets. This had a negative impact on demand and pulled down our exports. We saw a serious demand problem, especially in Europe. Thirdly, the problem of not being able to offer competitive prices due to the high appreciation of the Turkish lira in the second half of 2022 and the first half of 2023. Although our costs increased a lot in TRY terms, the rise in costs caused great damage to profitability as exchange rates did not increase. Many companies experienced difficulties in exports. For these three reasons, our 2023 exports fell by 2 percent to USD 5.15 billion. Our share in Turkey’s exports was 1.7 percent.
How were your export markets shaped in 2023? Has the Turkish furniture sector experienced a conjuncture parallel to the world?
Our biggest markets are Europe and the Middle East. In recent years, we have been rapidly developing our presence in the US market. In 2023, we saw a serious slowdown in the European market. Some countries even went into recession. As a natural consequence of this, there were double-digit decreases in the imports of these countries. But our exports to these countries declined less than the decline in their imports. We even managed to increase our exports to some of them. Thanks to the normalization of our political relations with Saudi Arabia in the Middle East market, we have achieved a significant increase in our exports. World furniture exports are estimated to decline by 7 percent in 2023. Our exports decreased by only 2 percent. Therefore, we managed to increase our share in the world market in 2023. We will see it clearly in a few months, but preliminary data indicate that our share will increase to 1.8 percent, the highest level ever.
Which countries have you been focusing on in exports recently?
While our recognition in the world is increasing day by day, apart from the markets where we are strong, we have recently started to focus on the countries within the scope of the Ministry of Trade’s Far Countries Strategy, and we are making various visits to these countries and participating in events related to our sector. In 2024 and 2025, we will focus more on this market with the recovery in Europe. The US is a market where we have increased our strength in recent years, but we still have a long way to go.
WE CAN NOT ACHIEVE SUCCESS IN OTHER AREAS WITHOUT SOLVING THE INFLATION PROBLEM
What do you expect for the furniture industry in the domestic market and exports in 2024?
Furniture manufacturing is a sector with high labor costs compared to many other sectors. Therefore, we are more affected by wage increases than other sectors such as white goods, electronics, machinery, textiles and automotive. Turning to the demand side, we see that our products have a higher price elasticity, meaning that as prices rise, demand falls more sharply. Therefore, we have disadvantages on both the production side and the demand side. In 2023, our production and sales for the domestic market were not brisk. We expect this to continue in the first half of 2024. Signs of a slowdown in overall domestic demand have become evident in the last few months. The increase in wages in January will support domestic demand in the short term. However, I do not expect this revival to be strong as our costs will increase at the same rate. A revival in new home sales is also not expected. Both prices are extremely high and it is not attractive to use housing loans. First of all, let’s accept this. The biggest problem in this country’s economy is inflation. We cannot achieve success in other areas without solving this problem. Throughout 2023, we supported the government’s fight against inflation by not raising prices and even offering discounts. In the first half of this year, we will patiently wait for the economy to pick up and focus on exports. We are a sector that already exports half of our production. In this sense, I think we are the leading sector in Turkey. In addition, our imported input rate in manufacturing is around 20 percent and we are one of the sectors with the lowest rate.
When we look at the export channel, we see that global furniture demand is declining. CSIL data shows that furniture trade worldwide declined by 7 percent in 2023. However, in terms of our sector, I think that the worst of the recent global recession is behind us. The US and European central banks seem to have come to the end of interest rate increases. Inflation is declining rapidly in both economies. In the second half of 2024, there may be interest rate cuts, especially in Europe. It is certain that the Eurozone will perform better in terms of growth in 2024 than in 2023. As MOSFED, we expect a revival after the summer months and a good year in both domestic and foreign markets in 2025.
You said that your share of imported inputs is low. What do you think about the measures introduced by the Ministry of Trade for imports? Are import measures also applied in your sector?
Yes, there are customs duties and surveillance on upholstery fabrics and metal evenings. These do nothing but increase production costs and therefore sales prices. There is no doubt that our Ministry is acting in good faith to protect and support producers. However, it is not possible to say that this practice has achieved its purpose. This is not what we expect from the Ministry to support the sector. Increasing the number of credit card installments would be a much more beneficial regulation for both furniture manufacturers and consumers. Since housing sales have already declined, our domestic market sales are negatively affected. We are one of the most productive and dynamic sectors in Turkey. We need to keep this sector alive.
“A FAIR AND REALISTIC EXCHANGE RATE LEVEL IS NEEDED”
In the past two years, the exchange rate has always been a topic of discussion. What do you think about the impact of the exchange rate on exports?
Starting at the end of 2021, neither the understanding of “let the exchange rate rise and exports increase” nor our attempts to reduce inflation by keeping the exchange rate under pressure afterward did help. After the election process, the inflation-exchange rate balance started to be established with the rational policies that started to be implemented with the new cabinet. As a country, we need to get rid of our obsession with the exchange rate. Our biggest need is low inflation. In parallel with this, we need a fair and realistic exchange rate level. We do not want a valuable TRY, nor a worthless one.