Tide may be turning for Turkey – but not just yet

Could Turkey emerge as one of the long-term winners from the COVID-19 pandemic? A combination of structurally low labour costs, a weak lira, its proximity to European markets and its customs union with the EU is leading a growing number of observers to think it might end up doing just that. It is certainly on the government’s agenda; and earlier this week, the country’s vice president Fuat Oktay told a business meeting in Ankara that one of its priorities for 2020 was to establish the country as an international travel and logistics hub.
Turkey Vice President Fuat OktayDespite Turkey’s undoubted geographical advantages, its recent history would suggest that such a goal is optimistic if not downright counter intuitive. In the second half of 2018, the country slipped into recession; Exports have plummeted despite a weakening lira; in the first half of the year the outflow of foreign capital reached nearly $10.5 billion; unemployment is heading towards record levels; and its tourist industry is under a sustained twin attack from terrorism and the fall-out from coronavirus. Even its key position on China’s Belt and Road (BRI) resurrection of the New Silk Road trade routes has failed to attract too many of the billions of dollars that President Xi’s government has thrown at the initiative.
But the tide may be turning in Turkey’s favour and its independence from BRI handouts may also turn out to be a strength rather than a weakness as an increasing number of multinationals rethink their supply chain’s reliance on China and look for alternatives closer to home. This may already be happening. When China went into lockdown at the turn of the year and before what seemed like a domestic epidemic turned out to be a global pandemic, Turkey’s clothing sector exports grew by nearly 7% year on year.
Turkey PPE lands at JBATurkey has also had a ‘good’ pandemic. Despite playing host to more than four million refugees and political asylum seekers, recorded deaths per million of population are so far running at under 60, which is less than one tenth of those in the UK; and as one of the world’s leading producers of PPE, it has been able to meet most of its own healthcare needs and help other countries to meet theirs into the bargain. “We  turned the coronavirus crisis into an opportunity with a great deal of determination,” claims Oktay.
With the daily death toll continuing to fall, President Erdogan recently felt able to announced a gradual lifting of restrictions aimed at kick-starting the world’s 19th largest economy. Many economists nevertheless forecast a painful second recession which may even force him to turn to the IMF for help, an option he has always rejected.
If Turkey does end up being one of the long-term winners post-pandemic, ‘long-term’ is going to be the operative word.