The volatile lira and tense geopolitics will keep foreign investors in Turkey hesitant about Turkey currency. However, the country’s large and diversified economy will ensure businesses need to win in this market to grow their emerging Europe, Middle East, and Africa businesses. Turkey’s GDP will perform in line with—if not slightly better than—the regional EMEA average for both 2020 and 2021 amid COVID-19. Yet, consumer demand will fluctuate, B2B demand will focus on cost savings or product maintenance rather than expansionary investments, the tourism sector will recover but remain below 2019 levels in 2021, and government procurement will be highly limited. To win in this market, it is critical for businesses to design a competitive e-commerce strategy, upskill and support distributors, and frequently build and review scenarios.
Trend #1: Turkey’s recovery pace will be highly vulnerable to geopolitical and lira dynamics. Turkey’s economy will grow moderately in 2021, supported by a rise in exports, a gradual normalization in consumption habits, and a slight pickup in investments in the second half of the year. Unemployment will likely remain sticky due to companies’ margin pressures. Fiscal pressures will limit government stimulus. Public projects are likely to remain weak until H2 2021. Anticipate volatile, rather than consistently rising, consumer spending.
Trend #2: Operating environment will require close monitoring. While GDP growth numbers are largely in line with the EMEA recovery’s averages and timelines, Turkey’s outlook for 2021 is marred by a highly unpredictable currency and ongoing geopolitical tensions that could delay a return of FDI once the global economy begins to recover.
Trend #3: Recovery pace will vary across sectors. The recovery outlook will vary across segments and customer types. Aligning on the timeline of recovery of various customers, identifying leading indicators to monitor that recovery, and adjusting tactics on at least a quarterly basis will be critical in growing the business and gaining market share in Turkey.
The situation in Turkey remains uncertain, with continued pressure on the country’s currency exacerbating macroeconomic vulnerabilities. Companies need to focus on building resilience within their Turkey businesses and understand the potential spillover effect on their business outside of Turkey.
For more information on lira volatility in Turkey, watch Managing Director and Head of Research, Martina Bozadzhieva, on CNBC. You can watch the full clip on CNBC here.
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