Letters from Turkey: Summer 2020 editionLetters from ...
News and interesting facts about the Turkish economy
How is Turkey handling the coronavirus crisis? And why is Istanbul attracting investment of nearly US$ 2 billion from Silicon Valley?
Every four months, Erol Tüfekҫi, director of the Bremeninvest office in Izmir, reports from the seaport on trends, opportunities and developments in Turkey.
Our topics in June:
Bremeninvest’s activities in Turkey
Bremen’s economic development agency operates a dedicated office in Turkey under its international brand name Bremeninvest. The office is located in Izmir, one of the country’s most vibrant cities. Our local colleague, Erol Tüfekci, has prepared a video – set against the impressive skyscraper skyline of Izmir’s modern Bayrakli district – in which he describes his work in Turkey:
Turkey’s way through the coronavirus crisis
After the economic turmoil of the last few years (currency crises and high inflation), Turkey had been hoping for a period of economic recovery in 2020. Data at the start of the year sent positive signals and the country’s GDP grew by 4.5 per cent in the first quarter of 2020.
But the coronavirus crisis could plunge the country into a recession. Turkey’s Minister of Finance, Berat Albayrak, is predicting a V-shaped recovery and thus continued economic growth. But other sources such as the European Commission and the International Monetary Fund are anticipating a 5 per cent fall in GDP due to weak demand in domestic and international trade, low investment and the impact of an ailing currency and high inflation.
Like many other countries, Turkey has adopted fiscal measures to support its economy, including low-interest loans, payment holidays, tax cuts, pension increases and a furlough scheme. In addition, special tariffs and import bans have been imposed to strengthen domestic production.
But thanks to its strategic geographical position, its strong industrial sector and its large domestic market, Turkey remains a promising proposition for companies – both as a sales market and as a base for production – in spite of these challenges. In the World Bank’s Doing Business 2020 ranking (before coronavirus), which compares the relative ease of doing business in different countries, Turkey was ranked in 33rd place – up by ten places compared with the previous ranking. Transport and renewable energies are sectors that will offer particularly attractive opportunities in the future. Wind power is one of the fastest-growing industries in Turkey.
Tourism in times of coronavirus – will travellers return?
Tourism is one of Turkey’s most important industries and accounts for around 12 per cent of the country’s GDP. The coronavirus crisis has put a halt on travel: International flights have been suspended completely since mid-March.
Now, Turkey is hoping for a swift recovery. Many tourist destinations reopened on 1 June, entry bans for travellers were lifted on 11 June and flights began to be reinstated on 1 July. Turkey has launched its own ‘safe tourism’ certification in order to promote the country’s safety. Hotels and restaurants can undergo an audit which assesses whether they have implemented appropriate measures to prevent the spread of coronavirus. German inspection, testing and certification service providers, including several TÜV agencies, are involved in the audit process. The measure is designed to strengthen confidence in Turkey as a holiday destination.
It remains to be seen whether this will help to attract at least some of the 60 million tourists that the country would have expected to welcome in a normal year. In the event of a resurgence of the virus, containment measures could be ramped up again quickly. Some provinces were already forced to reintroduce mandatory mask wearing in mid-June. A survey in Germany conducted by the German Automobile Association (ADAC) in May found that around a quarter of the survey participants had cancelled their plans to travel abroad.
In addition, Germany currently still has a travel warning for Turkey in place. This does not prohibit travel to Turkey, but the German Foreign Office advises against non-essential recreational travel. As a result, uncertainty remains high and Turkey has to hope that holidaymakers will be keen to visit its sandy Mediterranean beaches in the late summer and early autumn.
Zynga acquires Peak for US$ 1.8 billion
Turkey’s digital economy is largely unknown beyond its borders. As a result, the transaction of US video game developer Zynga from San Francisco caused quite a stir. In early June, Zynga announced its acquisition of Turkish start-up Peak for US$ 1.8 billion. This makes Peak, also a video game developer, the first Turkish ‘unicorn’ – a start-up valued at more than US$ 1 billion.
Zynga had previously purchased Turkish gaming start-up Gram Games for US$ 250 million in 2019. Turkey’s population has a median age of just over 30 years, so the industry’s tech-savvy target demographic is strongly represented in the country. Nearly half of the population plays video games regularly or occasionally. And there are more examples that showcase the substantial growth potential of the Turkish gaming and IT sectors. In 2018, Chinese online giant Alibaba acquired Turkish start-up Trendyol for US$ 750 million. The number of internet users in Turkey is still lower than in Germany, but industries such as gaming, e-commerce and information services have been growing rapidly and continuously for years.
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