According to the consolidated data of the machinery manufacturing industry shared by the Machinery Exporters’ Association (MAIB), Turkey’s total machinery exports, including free zones, in the first six months of the year was 13.5 billion dollars. Stating that the delay in the loosening of monetary policy due to the delay in permanent signs of decline in inflation has reduced expectations of a rapid recovery, Machinery Exporters’ Association President Kutlu Karavelioğlu said, “China is blindly scattering machinery around the world with export supports and credits. The EU and the US, on the other hand, are trying to maintain their competitive conditions by wrapping themselves in the armor of protectionism. Since many countries will have to face their own internal problems due to elections this year, two more critical quarters open to surprise developments await us.”
According to the consolidated data of the machinery manufacturing industry, Turkey’s total machinery exports, including free zones, at the end of the first six months of the year was 13.5 billion dollars. The decrease, which was 4.1 percent compared to the same period of the previous year, was calculated as 0.4 percent in the exports of the last 12 months, which reached 27.8 billion dollars. The significant decline in investor demand in the European region, where stagnation in the manufacturing industry continues, has led to contractions of between 6.6 and 17.9 percent in machinery exports to the top 5 markets in the region, Germany, Italy, the United Kingdom, France and Spain.
The six-month decline, which was 4 percent in the EU and 17 percent in Other Europe due to the impact of Russian sanctions, was balanced by 24 percent increases in North America, 11 percent in Latin America, and 14 percent in Asia.
Kutlu Karavelioğlu, Chairman of the Machinery Exporters’ Association, stated that the predictions they shared for the first two quarters at the beginning of this year were largely realized and that they had a balanced half-year compared to the slowdown in global industrial activities:
“As we entered the first quarter, when machinery and equipment industrial production contracted by 2.5 percent in the world and 4 percent in Turkey, we knew that a difficult 6 months awaited us. We expected the target country economies to start to recover as of the summer months with the interest rate cuts by major central banks.
The fact that the easing in monetary policy was postponed due to the delay in permanent signs of decline in inflation reduced expectations for a rapid recovery. Political and geopolitical developments, especially the election results in our main market, are limiting economic activities, total demand and trade. Under these conditions, although the 0.4 percent decrease in our exports in the last 12 months may seem negligible, the decrease in quantity approaching 8 percent indicates that our production scales have shrunk and we have suffered a weakness in competitiveness.’’
“Multiple crisis environment has minimum requirements”
Karavelioğlu, who mentioned that while the search for balance continues in the world, the area most affected by the multiple crisis and multi-polar environment, which it is not known how to combat, is competitiveness, commented on the developments in the foreign market as follows:
“The multiple crisis and multi-polar environment that the world is experiencing under the shadow of economic and political instabilities is disrupting the conditions of global competitiveness. China is blindly scattering machines around the world with export support and credits. The EU and the US, on the other hand, are trying to maintain competitive conditions by wrapping themselves in the armor of protectionism. Since many countries will have to face their own internal problems due to the elections this year, we are waiting for two more critical quarters open to surprising developments. EU countries, which aim to influence production mechanisms with digital and green technology principles, will put even more pressure on exporting companies with regulations similar to the Eco-Design Directive. Until expansion policies begin and global demand opens up, technological transformation in exporting companies will need to be supported more by public policies.
We also have the obligation to protect and look after our businesses that will respond to this demand, which is expected to increase by 2025, and to avoid practices that will cause irreversible weakness in their competitiveness. The qualified employment of over 500 thousand of our 30 thousand businesses in the classified machinery sector everywhere is on the radar of our competitors, especially EU manufacturers.”
“Inflation distances the exchange rate gap from production”
Karavelioğlu, who drew attention to the fact that the 11.9 percent increase in machinery and equipment investments in the first quarter did not make the expected contribution to production was affected by the negative effects of the difficult disinflation process as well as the unabated machinery imports compared to domestic production, stated the following:
“According to TÜİK’s 4-month data, the two sectors with the biggest decrease in production were ready-made clothing with 14.3 percent and machinery and equipment industry with 6.1 percent. The producer price indices determined as 71 percent and 57 percent, which are well above the PPI in these two sectors, are largely due to uncontrolled increases in personnel expenses. Machine manufacturing in Turkey is a growing sector within a cost structure focused on exporting 60 percent of its production. Now, as the inflation exchange rate gap widens, our sector is having difficulty meeting the needs of highly qualified staff required by technological competition with its main income, foreign income, and is suffering from the fact that it has a very high domestic added value ratio of 76.6 percent in exports. Since the dilemma of ‘producing less and selling more expensively’ that has marked the last year is not sustainable in the current conjuncture, the manufacturing industry is also turning to imports.”
“The reign of imports is getting stronger”
Karavelioğlu, who emphasized that the fact that domestic manufacturers, who are trying to retain their customers, are turning to buy-sell instead of make-sell also plays a role in the fact that investment goods imports are not shrinking as much as machinery production and exports, continued his words as follows:
“Although we are doing business in an investment and activity environment where uncertainties are greater and opportunities are more limited compared to rival countries, it is an indisputable fact that we have made faster progress than them in machinery production and exports to date. As one of the world’s largest machinery markets, Turkey offers great opportunities to all our sub-sectors in this development.
But let’s admit that with the incentive system, much more of these opportunities are provided to importers. While imported products come to our country with the great support, open or secret, of the countries of origin, importers are both fueling inflation and creating great profits with the prices they increase despite the suppressed exchange rate. The current process, where the most difficult business is export and the easiest and most fruitful business is import, unfortunately strengthens the reign of the importer sector.”
