TİM Chairman Gültepe: "Our $267 Billion Target for 2024 is Under the Pressure of High Costs and a Low Exchange Rate"

Noting that production costs have increased by over 100% in the past year, Chairman Mustafa Gültepe said, “In some sectors, the rate has exceeded 120%. In the same period, the increase in the dollar exchange rate remained at 25%. Therefore, we are unable to set prices in many sectors. We fell short of our targets in the first half of the year.”

Türkiye Exporters Assembly Chairman Mustafa Gültepe emphasized that exporters need to be released from the high-cost, low-exchange-rate squeeze to achieve the year-end target of $267 billion. He stressed the vital importance of promptly removing the barriers facing exporters, stating that exports are the most effective and sole way to combat inflation without cooling the economy.  

During a meeting attended by TİM Sector Council Members, Gültepe evaluated the first half performance of exports, current issues, and expectations from economic management. Speaking at the meeting, where TİM's 'Export 2024 Report' was shared, Gültepe recalled that they started 2024 with a target of $267 billion in goods exports and $110 billion in services exports. Reporting that they fell short of the target in the first half of the year, Gültepe continued:

"OUR EXPORTS HAVE BEEN FOLLOWING A HORIZONTAL TREND FOR THE LAST 1.5 YEARS"

Our six-month exports reached $125.4 billion, and our 12-month exports reached $257.8 billion. Compared to 2023, we are up by 2% in six-month exports and 2.5% in 12-month exports. For services exports, although the data is not yet final, we anticipate closing the first half at $44.6 billion. We have increased our services exports by around 3.4% compared to last year. Despite global market developments and domestic issues, it is significant that we completed the first six months with an increase. However, this figure may not lead us to our modest target for 2024.

Our exports have been generally flat over the past year and a half, despite monthly fluctuations. This result is influenced by regional conflicts, starting with Ukraine and continuing with Gaza, and a decrease in demand in major markets like the EU and the USA. However, the stable exchange rate despite the significant increase in our production costs has harmed our competitiveness. From July to July, production costs increased by over 100% in the last year. In some sectors, the rate exceeded 120%. During the same period, the dollar exchange rate increase remained at 25%. Therefore, we cannot set prices in many sectors. In terms of production costs, we are at least 40% more expensive than our Asian competitors and 15-20% more expensive than many European countries. Our $267 billion target for 2024 is trapped in the grip of high costs and a low exchange rate.”

TO ACHIEVE OUR TARGETS, WE MUST GROW BY 10% EACH YEAR

Emphasizing that Türkiye has largely lost its competitiveness, Gültepe highlighted the severe damage, particularly in labor-intensive sectors. Citing data that clearly illustrates the situation, Gültepe continued:

“In 2023, we lost market share in nine of our 26 goods-exporting sectors. We are facing a similar situation in the first half of this year. For example, in the apparel sector, which is one of the leading sectors, our exports fell from $9.9 billion in the first six months of 2023 to $8.7 billion in the same period this year, a decrease of 12.8%.

Compared to the first six months of 2022, the loss approaches 20%. A similar situation exists in many sectors. In the first half of this year, we experienced losses of 6.7% in iron and non-ferrous metals, 3.8% in textiles, 4.5% in furniture, 9.4% in cement, glass, ceramics, and soil products, 26.7% in leather, and 22.3% in olives and olive oil. As profit margins decreased and, in some sectors, sales were made at a loss to retain customers, companies' operating capital diminished. There has been a significant increase in the number of companies declaring bankruptcy recently. We began the second century of our Republic with the vision of elevating Türkiye into the top 10 exporting countries. We aim for $375 billion in goods exports by 2028. For this medium-term target, we need to grow our exports by an average of 10% annually. However, with exports squeezed by a low exchange rate and high costs amid declining demand, achieving our $267 billion target for this year seems difficult. In the long term, we know we must increase the added value in exports and raise our unit price per kilogram from the current $1.5 level to over $3. As TİM, we are leading our firms in leveraging high technology, design, branding, innovation, and developing green production capacities. Our sectors have completed action plans, which serve as roadmaps for compliance with the Green Deal. We are monitoring the implementation process at regular intervals. In the short term, we expect the immediate removal of obstacles that weaken our competitiveness, slow us down, and hinder our progress.”

Reminding that Türkiye is going through a challenging inflationary period, Gültepe stated they are ready to provide all possible support against the high cost of living, which particularly strains the lower and fixed-income groups. Emphasizing that exports are the only and most effective way to sustain growth while combating inflation, Gültepe said, “In previous disinflation processes in our country, we prioritized exports to prevent the economy from cooling, production from slowing down, and the wheels from stopping. Today, we are ready to take on responsibility with the same understanding.”

THE DIFFERENCE BETWEEN INFLATION AND EXCHANGE RATE SHOULD NOT EXCEED 5 POINTS

Outlining his expectations from economic management to revive exports in the short term, Mustafa Gültepe listed them as follows:

• The exchange rate should move in parallel with inflation, and the difference between inflation and the exchange rate should not exceed 5 points.
• The tax burden on the import of raw materials and intermediate goods that are not produced domestically or cannot meet demand should be lightened.
• Regulations that will impose additional burdens on producers and exporters, further harming competitiveness, should be reviewed.
• Energy costs, such as electricity and natural gas used in production, should be kept to a minimum as conditions permit.
• We find the financial support provided to our exporters by Eximbank and IGE A.Ş. very meaningful during difficult times. However, to overcome this process with minimal damage and prepare for the future, financing opportunities under more favorable conditions should be created.

Mustafa Gültepe announced that they are nearing the end of their efforts to restructure Türk Ticaret Bankası, which they acquired 1.5 years ago through İGE A.Ş to provide financial support to exporters. He added that the bank is expected to start operations by the end of the year.