Istanbul Traders Club Association/Onel: SMEs Are Looking for a Backup Plan
Forex - İlker Önel, President of the Istanbul Traders Club Association, stated that a year marked by both inflation and aggressive measures to suppress it has passed. He noted that the Turkish economy will continue to be shaped by inflation, interest rates, and global uncertainties in 2025.
Önel remarked that the Turkish economy and the real sector are facing challenging economic conditions in 2024. “We cannot think about these conditions independently from the developments that occurred in the world and Turkey over the past few years. The global pandemic that affected the entire world between 2020 and 2022 significantly impacted production and sales processes across all sectors in Turkey and globally, while conflicts in our vicinity caused disruptions in global supply chains. Unfortunately, increasing costs coupled with decreasing profits, low capacity, and rising financing expenses have put businesses in a difficult position,” he said.
Recalling that the Central Bank of the Republic of Turkey (CBRT) policy interest rate was reduced from 19.5% to 14% in December 2021 following the dismissal of Naci Ağbal in March 2021, Önel commented, “We can perceive this period as one where inflation rose, purchasing power declined, and social peace deteriorated. On the other hand, as global inflation increased and pushed countries into a cycle of interest rate hikes, we continued with a heterodox policy of reducing interest rates. Consequently, we experienced a period marked by rising inflation, increased risk premiums, and the depreciation of the Turkish Lira, which adversely affected the quality of business assets.”
Continuation of Tight Monetary Policy Önel expressed the view that 2025 will be a year where the battle against inflation and tight monetary policy will continue at a decreasing pace. He stated, “This effect will be particularly pronounced in the first 3-4 months in the markets. I believe firms will be significantly affected by the general economic context both in Turkey and globally. In November, the CBRT maintained its interest rate at 50% for the eighth consecutive time. While we expect the CBRT to remain committed to a tight monetary policy, there are expectations that it will begin to gradually lower interest rates, and we anticipate that the TL will continue to depreciate. Although this indicates that sectors exporting goods and services will continue to face a challenging period, it will be effective in combating inflation and suppressing the exchange rate. With interest rates expected to be controlled and gradually lowered from the first three months, there could be a brief period of turbulence in the foreign exchange market, but we may begin to reap the benefits of the fight against inflation toward the end of the year.”
“Interest Rate Cuts Will Be Determinative in Domestic Market Demand” Ilker Önel expressed that there will be limited growth in domestic market demand in the new year, while he does not expect a rapid recovery in external market demands. “Within the framework of the inflation-fighting program in the domestic market, if there is a slowdown in the rise in core and monthly CPI in the first quarter, we may see improvements on the demand side. The interest rate reduction process here will be decisive. The increase in the minimum wage and the approach of Ramadan will also support the improvement in demand. However, rising costs on the producer side will inevitably be reflected in final product prices," he noted.
Regarding external markets, Önel indicated a more pessimistic outlook for the real sector, stating, “Business activities in the two locomotive economies of the Eurozone, where we conduct over 40% of our exports, are not going well. Germany has long been facing difficulties with factory orders in manufacturing. The desire for spending looks weak alongside increased savings on the demand side. France, meanwhile, is in serious trouble both politically and economically, with the country’s debt stock reaching 110% of total GDP, and industrial production and PMI appear weak. Therefore, it seems that there will be no immediate improvement in demand in external markets.”
Global Growth Expected to Drop by 2.5% in 2025 In light of developments in the Eurozone, Önel noted that there are serious conflicts and uncertainties expected around Turkey in the short term. “I predict that these uncertainties will negatively affect both global trade and us. Global growth is expected to decrease to 2.7% in 2024 and further to 2.5% next year. In this case, exporting companies need to aim to increase customer diversity in the markets where they securely procure orders while narrowing the focus and implementing an intensive sales strategy to boost turnover and profitability,” he commented.
Real Sector Awaits Low-Cost Credit Önel expressed that the major challenges faced by real sector firms in 2024 include issues related to foreign trade, a decline in global and local demand, difficulties in accessing financing, and labor and employment problems. He stated, “To somewhat alleviate the difficulties faced by the real sector, especially SMEs, in 2025, our expectation is the preparation of a B plan that ensures our access to low-cost financing opportunities. For instance, low-cost loans to be provided by banks through the Credit Guarantee Fund (KGF) within their authority will be a lifeline for our members and all businesses that are the backbone of our economy.”