Turkey offers a promising but often complex and challenging market, requiring adaptability, persistence, and patience. U.S. exporters may face many of the same challenges that exist in other semi-developed markets, such as unpredictable judicial, legal, and regulatory frameworks; instances of inconsistent or contradictory policies; burdensome documentation requirements; unanticipated tariff increases on certain products; localization requirements; lack of transparency in tenders, as well as difficulties with the public procurement process, including price preference for Turkish companies.
Furthermore, Turkey has been experiencing an economic downturn since 2018, exacerbated by the COVID-19 pandemic. Companies may find weakened demand throughout the remainder of 2022 and into 2023 driven largely by the ongoing currency crisis. Burdensome debt levels (much of which is denominated in USD and euros), a weakening TL, and volatile unemployment all weigh heavily on foreign or domestic firms’ ability to sustain, much less grow, operations in country. Turkey is also running current account and capital account deficits that have been exacerbated by soaring energy import costs. As of Junes 2022, the central bank has maintained a 14% interest rate – a deeply negative rate in real terms – despite inflation soaring to over 70%. Much of the private sector borrowing in Turkey has been via foreign exchange-denominated loans, which become harder to service as the value of the TL slides relative to the USD or the Euro.
The most effective method to address these obstacles is to work with a Turkish partner to obtain local insights and determine potential solutions. Careful planning and a long-term outlook are key to success in Turkey. CS Turkey is here to help U.S. business navigate the Turkish business environment by identifying reputable local partners.