Consumer Spending is on the Increase in Turkey

Greece is smothered in economic problems, but its neighbor, Turkey is seeing its economy sizzle.  Not only is Turkey’s economy growing, but its consumers are shopping and retailers from all over the world are seeking to get a presence in Turkey or expand rapidly their existing operations.

Tesco has announced that it will be opening 70 stores, PepsiCo is stepping up efforts to sell more of its snacks and drinks after seeing its revenues increase by double digits last year, and the somewhat staid Unilever has seen its business triple over 11 years. The main impetus for Turkey’s growth is the big and increasing consumer economy, with more and more people entering the middle class.

Turkey’s gross domestic product grew a staggering 8.5% last year, and consumption makes up 70 percent of the country’s economic output, an increase in GDP that was only second to that of China.

Turkey is seen as one of the few countries that has not been negatively impacted by the post 2008 global economic crisis, but of our course the country’s strategic location in straddling Europe and Asia doesn’t make it immune to the ongoing Eurozone crisis.  Approximately 40 percent of the country’s exports go to Europe, much of which could be at risk as the Eurozone crisis lingers.

But, there are also some warning signs.  Sales of the fastest growing consumer goods decreased 1.3 percent in April from a year ago, non-alcoholic drinks decreased 1.5 percent and tobacco dropped 2.5 percent. But, based on value, due to inflation and taxes, all of these items actually increased in sales.

The country is also facing a risk of devaluation of its currency, the lira.  The liri dropped substantially against both the dollar and euro last year, increasing inflation, but recovered a bit, but this currency movement affected discretionary consumer spending.

While concern that the growth disappears quickly is a concern, Burak Tansan, managing director of Boston Consulting Group in Istanbul recently stated, “We do not have a bubble.”

Author: Jeffrey Friedland

Big Emerging Economies Stock Exchanges to Begin Cross Listings of Equity Derivatives

In an initiative called “Bricsmart”, stock exchanges in each of the world’s five largest Big Emerging Economies announced Friday that they would begin trading in each of the other countries derivatives of their benchmark equity indexes. This move will likely increase the interest in big emerging economies by global investors.

The five countries that will cross-list their equity derivatives are Brazil’s BM&FBovespa, Russia’s Micex-Rts, India’s Bombay Stock Exchange, the Hong Kong Stock Exchange and South Africa’s Johannesburg Stock Exchange, a joint statement said.

A likely outcome will also be the increase of capital inflows to Big Emerging Economies over time, especially as Europe’s Euro crisis seems unabated, and the long-term economic outlook for the United States is seen by most economists as being very problematic.

Big Economic News From Turkey

Turkey’s economic growth numbers are in for 2011, and the country’s economy grew by 8.5 percent. But, of a concern to many is that the country’s growth rate for the last quarter of the year was only 5.2 percent.  While Europe or the U.S. would welcome a growth rate of more than 5 percent, Turkey’s growth rate in the last quarter of last yeear is raising concerns.

Some naysayers have already attacked the country’s growth numbers indicating that the country’s growth in the last quarter indicate an economic slowdown, in that they’re substantially down from much higher growth rates earlier in the year.

Many are hopeful that the decline in Turkey’s growth rate is a sign of a “soft landing” and a re-balancing of the economy from domestic demand to an export driven economy.  Other economists are raising concerns that real economic growth is minimal in that the annual rate of inflation of around 10 percent, exceeds the country’s growth rate.

But, it’s widely agreed that the likelihood of more money printing by the European Central Bank and U.S. Federal Reserve, will result in much of the “excess liquidity” finding its way to Turkey, and for that matter other Big Emerging Economies. Contributing to the likely attractiveness of Turkey as a destination for foreign investment is not only due to last year’s decline of the Turkish lira, but also the general belief that the country’s growth rate will stay above 5 percent.

But the unknown wild cards that will ultimately affect Turkey, are not so much the country’s own economy, but more importantly the economic issues of all of Europe, as well as the effect of geo-political issues affecting Syria and Iran.

 

While the Eurozone Moves into a Recession, Poland’s Economy Continues to Grow

Eurozone economies that haven’t been in a recession are now moving into one. This includes Germany, the country that has been the engine of the Eurozone’s growth.

But a bright light on the continent is Poland, which has the benefit of not being on the Euro.  Industrial production numbers released this week indicate that Poland’s industrial production increased 9 percent in January.

Poland’s production of goods for export, which includes machinery and chemicals were up strongly.  In 2011 Polish exports grew by 10.5 percent to a record amount of €138 million.

But with a slowdown in Germany and no long-term sustainable solution to the Eurozone economic problems, one has to wonder whether Poland’s economy can continue to grow if Germany’s economy continues to stall.