Şekib Avdagiç, the President of the Istanbul Chamber of Commerce (ITO), evaluated the developments in the first six months of the year and the expectations of the Istanbul business world for the second half.

Pointing to ongoing global risks, Avdagiç stated that geopolitical uncertainties are affecting the economy, and there hasn’t been a significant event in the external environment that could clearly influence Turkey’s roadmap at this time.

Emphasizing the importance of foreign direct investments, Avdagiç remarked that BYD, a Chinese electric vehicle manufacturer, making a $1 billion investment is an exceptional opportunity.

Avdagiç continued:

“There haven’t been any greenfield investments in the automotive sector in Turkey for a long time; there haven’t been new brand investments. In the last 20 years, apart from Togg, there have been no zero car investments. Existing firms have made investments, but for the first time, a foreign investor has made such a decision in the automotive main industry after a long time. Recently, both the U.S. and Europe have brought up an approach requiring balancing taxes to force Chinese firms to invest in their own regions. Turkey has led a pioneering process on this issue. The car factory to be established by BYD is commendable.”

NEW CHINESE FIRMS ARE COMING

Shakib Avdagiç expressed his belief that several Chinese companies could rapidly come to Turkey for direct investment.

Avdagiç stated, “This could be in automotive, white appliances, or service industries related to these sectors. They have very strong brands in areas such as technology, home, and consumer electronics. Thus, Turkey and the EU through Turkey could become more attractive. Therefore, I think in the upcoming period, rather than European firms, Chinese firms will stand out for direct investments. I cannot name names because it is not yet clear, but we foresee a few more investments.” he said.

“IMPORTANT GAINS AND ACHIEVEMENTS IN THE FIRST 6 MONTHS”

Avdagiç stated that significant gains and achievements were made in the first six months of the year, noting that there was a balancing in the current account compared to the previous year during this period.

He evaluated, “As you know, despite the inflation-fighting program last year, some processes came into play, like the EYT (Elderly Retirement Law). Meanwhile, with the payments made to retirees, a significant amount of cash and purchasing power entered the market. A large resource, outside of routine company transactions, was suddenly transferred to retirees.

The main group has retired through EYT, but every month, an amount equivalent to twice Turkey’s normal retirement numbers is still retiring through EYT. This process is not over yet and will continue for a few more years. Thus, it will continue to present itself as additional cash inflow in the market. It is crucial to catch the day when the household inflation expectations align with the Central Bank’s inflation expectations. Once the public’s forecasts and the people’s forecasts coincide, we can take much faster steps in tackling inflation.”

INFLATION EXPECTATIONS FOR JULY AND AUGUST

Avdagiç stated that due to a base effect, a significant drop in inflation is expected in July and August, which should be evaluated carefully.

He noted that ITO is closely monitoring the monthly inflation trends, stating, “How much is it increasing monthly, and what will its annual cumulative effect be? Thus, the fight against inflation is ongoing. We believe that the battle against inflation should consider all other elements as it continues. We need to adopt an approach that will minimize the load and damage resulting from the fight against inflation.” he said.

“GUEST MONEY LEAVES WHEN THE TIME IS RIPE”

ITO President Avdagiç expressed that Turkey should keep exports as a top priority in the coming period.

He pointed out that there has been a significant influx of funds from abroad to the country in the first six months of the year, referring to this as “guest money.”

Avdagiç stated, “Therefore, just like any guest, guest money will leave when the time comes. However, we should place greater emphasis on sustainable exports, which means relying more on our own earnings. We have achieved important successes in bringing our financial balances to a certain point with guest money. This is undoubtedly very valuable. There has been a significant decrease in CDS (Credit Default Swaps), and we have now permanently dropped below 300. Our expectation is for it to decline to around 150. The numbers that Turkey deserves lie in that range; we need to quickly find ourselves in the 100-150 band. In the second half of the year, the most critical topic we are underlining is exports. Right now, we believe that Turkey must focus on the sustainability and maintenance of exports.”

WHICH SECTORS ARE EXPERIENCING CONTRACTION?

Currently, we are seeing signs of contraction primarily in fast-moving seasonal products such as apparel, ready-to-wear, footwear, and leather. Exporting is a long-term endeavor. You are concerned with the customer over a very long term, establishing your production lines related to it, and continuing your exports. Since we have begun to see the gap widen from the start of the year, we have been saying that the correlation between the exchange rate and inflation should not be lost. This does not mean that there will be a one-to-one correlation, but this correlation should not be lost. The moment you lose that correlation, you may exert pressure on the exchange rate in the short term; you may bring in funds from outside, and the picture may look good at that moment.

Avdagiç emphasized that more weight should be given to policies prioritizing exports, expressing significant expectations in this regard for the second half of the year.

“THE FIGHT AGAINST INFLATION SHOULD NOT BE ONE-DIMENSIONAL”

Shakib Avdagiç highlighted that there are serious investments made in certain regions of Anatolia benefiting from the 6th and 7th region incentives, stating, “There are substantial job opportunities here. Thus, this brings significant contributions to social peace. This situation needs to be preserved. In this regard, we believe that the fight against inflation should not be one-dimensional.” he said.

Referring to the number of tourists coming to Istanbul, Avdagiç noted that the first six months of the year were good in this respect.

He added that there is no alarming situation regarding hotel prices and occupancy rates in Istanbul, stating, “Despite all cost increases, we faced price reductions in foreign currency to keep tourists. If there are no macroeconomic issues in the second half of the year, we predict that Istanbul can conclude this year similarly to the previous year.”


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