Machine exports to Turkey decrease significantly
Deliveries shrink in the first half year by almost 7 percent - Currency crisis is making itself felt
Turkey's economic difficulties are getting more and more obvious in machine deliveries from Germany. In the period from January to June 2018, machine exports to the Bosporus shrank by 6.6 percent compared with the previous year. The negative trend is likely to continue in the coming months as the Turkish lira has fallen significantly against the euro. In July 2018, 1 lira was still worth 18 euro cents on average. In 2017 it was 24 euro cents on average and in the year before it was 30 euro cents. "The sanctions and punitive tariffs recently imposed on Turkey by US-President Donald Trump have sent the Lira downhill again. This makes imports considerably more expensive for Turkish customers. However, the weak Lira exchange rate is also a great burden for all those companies that have taken out loans in foreign currency," says VDMA chief economist Dr. Ralph Wiechers.
The general conditions remain difficult for the Turkish manufacturing industry. The mood improved after the elections in July. However, at 49 index points (June: 46.8), the purchasing managers' index remained below the threshold of 50 points, signaling a possible contraction in economic performance. While production and new orders in manufacturing declined, export orders increased for the first time in three months. The weaker lira has improved the price competitiveness of Turkish exports. However, this advantage is partly eroded by the fact that numerous preliminary products have to be purchased increasingly expensively from abroad.
"The sanctions and punitive tariffs recently imposed on Turkey by US-President Donald Trump have sent the Lira downhill again".
High dependence on imports
With a market volume of around 29 billion euros, Turkey is the twelfth largest machinery market worldwide. Only just over a third of the machines sold come from domestic production. This means that the majority of the machines must be purchased abroad. Germany is the most important foreign machine supplier in Turkey with a market share of 13 percent. China (10 percent), Italy (9 percent), the United Kingdom and Japan each have a market share of 4 percent.
From the perspective of the German machinery industry, Turkey currently ranks 14th among the top export markets. Machines and plants worth 3.7 billion euros were delivered from Germany to Turkey in 2017. Important export goods are conveyor technology (share of total exports: 8 percent), drive technology, general air technology, power systems and textile machinery (each 7 percent).
Own added value is low
Turkey has a broad industrial base. Textiles and textile products are the most important industry in terms of employment, turnover and value added. Important export sectors besides the textile industry are the vehicle and vehicle parts industry as well as the food industry. The Turkish mechanical engineering industry ranks 7th in the industry rankings and had around 212,000 employees in 2015, generating a turnover of 18 billion euros. The value-added ratio was only 25 percent. This shows that the Turkish mechanical engineering industry is heavily dependent on the purchase of intermediate products, also from abroad.
Production is growing
According to the Turkish statistical office, mechanical engineering industry is currently developing very positively. Following production growth of 9 percent last year, production increased by almost 11 percent year-on-year in the first five months of the current year. The cumulative growth rate should decline slightly in the coming months and become single-digit, as production values in the second half of 2017 were significantly higher than in the first half.