Turkey: Challenging Times – Part 1

Introduction

The general election result in June proved to be a body blow for the ruling Justice and Development Party (AKP) under the leadership of Recep Tayyip Ergogan, as it lost its parliamentary majority for the first time in 13 years. The President’s hopes of changing the constitution into a strong presidential system were dashed. Negotiations on forming a coalition between the AKP and the main opposition party, the Republican People’s Party (CHP), began soon after the election. By now, readers should know if either a coalition has been agreed or, failing that, a new election has been called.

Slowing down

At the end of May, Raziye Akkoc, writing in the financial section of The Telegraph, said, “If the speed of a nation’s trains was an indication of the pace of an economy, it would be full steam ahead for Turkey.” The article was written as the first of the new multiple ultra-high speed trains entered service on the Ankara-Konya line. It is one of seven that will connect conservative heartlands in central Turkey with the Western hubs of Istanbul and Izmir. The new train, which was supplied by the Siemens company, can reach an operating speed of 320 km/hr. The other six trains, also being supplied by Siemens, are expected to be delivered during the first half of 2016. Akkoc, of course, was alluding to the spectacular growth of the country’s fortunes since 2001 after the International Monetary Fund (IMF) had effected a bail-out programme during the financial crisis. For the best part of a decade the country had been hailed as one of the world’s next economic giants alongside other emerging markets. It had a strong economy, inflation was brought under control, the banks strengthened and foreign investment soared to new levels.

Now, however, judging by recent predictions, the country appears to be running out of steam. Four years ago, Turkey was growing at a rate of 8.80% but, like other emerging markets – particularly Brazil, India and Russia – it is experiencing a marked slowdown. In 2012 GDP dropped to 2.1%, rising to 4.1% in 2013. This year the Turkish lira has fallen to record lows against the US Dollar. Before the general election in June, Akkoc’s forecast for 2015 and 2016 was for a GDP growth of 3.5% and 3.7%, respectively.

As the country faces economic challenges, the new government will want to continue to implement infrastructural transformation programmes. These involve the notable public-sector mega projects and transportation systems that were initiated under the 13-year AKP regime.

Building for the future

Local press reports indicate that Turkey’s construction market is in a healthy situation, while a survey by MEED Projects reveals the value of major active construction works has been running at about US$350 billion. The country’s population is said to be growing annually at about 1.2%. This is naturally creating greater demand for housing and infrastructure. There has been much investment from the Arabian Gulf, including the likes of Emaar properties, which is building over 1000 homes, a hotel and a mall at its Emaar Square project in Istanbul.

This is part one of a three-part article written by Paul Maxwell-Cook for World Cement’s September issue and abridged for the website. Subscribers can read the full issue by signing in, and can also catch up on-the-go via our new app for Apple and Android. Non-subscribers can access a preview of the September 2015 issue here.

Read the article online at: https://www.worldcement.com/europe-cis/03092015/turkey-challenging-times-part-1-492/