Global recession brake on economy – Dünya Newspaper


● The July PMI data announced both in the world and in Turkey were considered as the footsteps of a global recession. The contraction that started in many sectors is expected to deepen in the coming period.

● Stating that the developments in the domestic market will negatively affect investment, production and employment with the effect of the problem of access to finance, the representatives of the sector emphasize that the inevitable recession in the EU, which is the main market, will also lead to a decrease in exports.

As in the rest of the world, the latest economic data in Turkey indicate that a global recession is inevitable in the upcoming period. One of these data is the Turkish Manufacturing Purchasing Index (PMI), announced by the Istanbul Chamber of Industry (ISO). It is below 50. Moreover, the index, which declined to 46.6 in July, draws attention as the most significant slowdown since May 2020. The index, which includes 10 sectors, is evaluated as a sign that the third quarter will be difficult for companies operating in the Turkish industrial sector, due to the apparent weakening and pressure observed in global economic conditions. Similar regressions continue around the world. The Global Manufacturing Purchasing Managers Index fell 1.1 points to 51.1, the lowest value in two years. Thus, production and employment in the global manufacturing sector, which made a weak start to the third quarter, stagnated, while new orders, especially exports, declined. The decline is also experienced in the EU, Turkey’s main export market. While the said index decreased to 49.8 in the Euro Zone, the PMI index was below 50 in almost all EU member countries. Industry representatives emphasized that the recession, which is inevitable in the upcoming period, especially in the EU, which is the main market, will negatively affect investment, production and employment in Turkey. Stating that the negative effect of inflationary pressure and decreasing purchasing power in the domestic market will increase the downward pressure on prices, business people say that the recession to be experienced in the EU, which is the main market, will also fall behind the targets announced at the beginning of the year in exports in some sectors.


According to the latest economic data, input costs and final product prices of basic metal industry companies continued to increase sharply. While new orders slowed sharply, this slowdown was the most marked since the first wave of the epidemic. Accordingly, firms reduced their production and purchasing activities. Çetin Tecdelioğlu, Chairman of the Board of the Istanbul Ferrous and Non-Ferrous Metals Exporters’ Association (IDDMIB), stated that there are still orders inside, they have not seen any change in deliveries, but there has been a serious decrease in requests, e-mails, questions and requests. Tecdelioğlu said, “Consumer has serious difficulties in accessing finance. There are very high interest rates. As long as people do not have an appetite for borrowing, the consumption trend is moving in this direction in parallel,” he said. Regarding the investment environment, Tecdelioğu said: “The investments that have started now continue, but there is no appetite for new investments and capacity increases. Unfortunately, very high costs and interests reduce the appetite. If there is no investment, there will be no extra employment. We do not expect a reversal at the moment, but our expectations for an additional increase are low. We can also see decreases in exports, but the opportunities that may arise from the Russia-Ukraine War, the crises that may arise between Taiwan and China, the opportunities arising from the breakage of supply chains make our country the B plan of the world.”

The sector, which has an export target of 20 billion dollars for the end of the year, achieved an export of 8.8 billion dollars between January and July. This figure represents a 33 percent increase compared to the same period of the previous year. On the other hand, the capacity utilization rate in the basic metal industry decreased from 82.1 percent to 80.6 percent in July after a 4-month increase.


According to PMI data, one of the sectors that experienced the most significant decline was the textile sector. In the sector, which started the year with an export target of 15 billion dollars, and made new investments equal to 20 percent of the total capacity during the epidemic period, new orders definitely slowed down in July. This contraction stood out as the most significant slowdown since January 2016, excluding the first period of the epidemic. A similar loss of momentum was experienced in new export orders. Ahmet Öksüz, President of Istanbul Textile and Raw Materials Exporters’ Association (İTHİB), stated that they are experiencing a contraction in the market and that they cannot fill their capacities at the moment. Öksüz said, “The sector entered this year with very new investments. Significant investments were made this year last year. We cannot find the return of these investments. Most of them are idle, yarn facilities have an idle capacity of up to 50 percent. In this case, we do not expect new investment and employment. As for the export target, we do not want to make any revisions yet. “We are hopeful for the third quarter,” he said.

As of May, 504 thousand employees are employed in the textile sector, where 19,923 companies operate. The sector, which finished last year with 12.9 billion dollars and started this year with a target of 15 billion dollars, realized an export of 6.8 billion dollars in the first half of the year. The capacity utilization rate of the sector also decreased from 77.6 percent to 76.6 percent in July.


The leather industry, which increased its exports by 29.6 percent to 1.73 billion dollars last year and aims to exceed 2 billion dollars this year, realized an export of 1.1 billion dollars as of July. Both export and capacity utilization rates in the sector are on an increasing trend for the time being. However, the sector is lacking in appetite for new investment and employment. Burak Uyguner, President of the Turkish Leather Manufacturers Association, said, “There is a decrease in the rate of increase in our exports in January-July, but we attribute this to the holiday holiday. We do not expect a dramatic decrease in terms of the epidemic period. Our only problem is that our capacities are not enough. A serious problem in the EU will definitely have a negative effect as it is our first export market. Even if there is no increase in investment and employment, we do not expect a decrease,” he said.


Chemistry, one of the locomotive sectors of Turkey’s exports, is also among the downshifting sectors. According to ISO PMI data, in July, input costs in the chemical, plastic and rubber products sector increased at the lowest rate of the last 13 months and final product prices increased at the lowest rate of the last 11 months, while disruptions in supply chains became evident and delivery times increased at the highest rate since March. It is noteworthy that the new orders in the sector recorded a sharp decrease at the beginning of the third quarter, while there was a similar decline in production and the decrease occurred at the highest rate since April 2021. Adil Pelister, Chairman of the Board of Directors of Istanbul Chemicals and Products Exporters’ Association (İKMİB), who made evaluations about the sector, said that the sector PMI index for the last two months remained below the headline indicator, reminding that there is a recession expectation in the world in the coming period and stagflation expectations have emerged. Noting that in case of stagflation or recession, it may also affect exports negatively, Pelister pointed out that they hope that Turkey will be less affected by the possible recession with its prominent logistics advantage and product quality due to the deterioration of the supply chain after the pandemic. Pelister said, “There may be a slowdown in the sector depending on the global developments. However, we anticipate that employment will increase with the capacity-building efforts of the sector and the start of the ongoing investments, and that our country’s exports and sector exports, which also offer logistics and quality advantages, will continue to increase.


Another representative of the sector, TOBB Plastics, Rubber and Composites Industry Council President Yavuz Eroğlu also reiterated that Turkey will be adversely affected by the recession that will most likely be experienced, but that it is less likely to be affected by its logistics advantage and competitive price advantage. On the other hand, pointing out that the picture is not very bright in terms of investment and employment, Eroğlu said, “The general trend shows that Turkey will most likely be adversely affected by a possible recession, we had our own vulnerabilities, and on top of that, a recession will follow. If we look at investment and employment, the credit taps have been turned down. This negativity affects investments negatively. The lack of new investments will also negatively affect employment.


According to PMI data, new orders and production slowed sharply in non-metallic mineral product manufacturers such as mines. The slowdown was the most significant among the ten sectors subject to PMI data. Accordingly, firms have also reduced their employment levels and purchasing activities. Rüstem Çetinkaya, Chairman of TİM Mining Sector Board and Chairman of the Board of Istanbul Mineral Exporters’ Association (İMİB), drew attention to the mining sector and said that there is no decrease in orders as a sector at the moment. Noting that there was a decline in orders only on the block natural stone side, Çetinkaya said, “There is a decline in unit prices in metallic mines. Therefore, there is a slight decrease in the amount of metallic mines. As an industry, we have difficulties in accessing finance and we want a more fair system. On the export side, we may be slightly below the figures we have foreseen for the end of the year, but it looks like we will reach it.”

Fayat: Good if we catch last year

According to PMI data, the production of the clothing and leather products sector recorded the first decline since January after a period of strong increases in a row. New orders also slowed down, while employment declined for the first time in four months. The sector expects a significant decline in export targets this year. Şeref Fayat, Chairman of TOBB Ready-to-Wear and Apparel Sector Assembly, noted that the contraction he has been talking about for about a month has begun. Fayat said, “We are going through a process whose signals we have seen before in the EU and which we know will happen in Turkey as well. Our main market is heading towards a recession, which we will feel even more clearly, especially as of the 3rd quarter. On top of that, the announcement of the energy crisis and even the energy reduction programs will erode the demand in the main market. This will make changes in the targets, especially in our sector. The targets, which we said we expect an increase of 15 percent, have reached a situation that we call good if we catch up with last year. Is it worse, you have to watch it for a few months. We see this in the slowdown in the rate of orders coming to us. We maintained 15 percent in the first 6 months, but the rate of increase in exports dropped to 10 percent in the last 1 month and 9,5 percent in the last year. Therefore, it seems as if the goal here will be to catch up with last year. In terms of investment and employment, I do not expect any mobility, especially in an environment where the need for working capital has increased so much,” he said. The sector, which achieved an export of 20.3 billion dollars last year, was targeting an increase of 23 billion dollars this year. The sector, in which 41 thousand 256 companies and 716 thousand people are employed, realized an export of 12.4 billion dollars in July, as well as the capacity utilization rate in the January-July period.

Laçin: More affordable products stand out

While the PMI index decreased to 45.2 in the electrical and electronic products sector, it was observed that new orders slowed down for two consecutive months in July, and the said slowdown has been recorded at the most significant level since February. While a decrease has been observed in production for the last two months, it was noted that the increases in both input costs and final product prices slowed down. One of the experienced names in the white goods industry, Silverline Chairman of the Board Mustafa Laçin pointed out that Europe carries a serious risk regarding the recession, and said that European customers started to put pressure on prices. Pointing out that the European customers both bought less and demanded low prices by using this stagnation, Laçin said, “They want to turn the situation into an opportunity. In this case, we are trying to produce projects and offer more competitive and affordable products. However, these projects are not works that can be done in a month,” he said.

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