Metiner cited the continuation of poor economic prospects in neighboring Europe as the reason for Turkey's slower expansion next year. “We are predicting, together with our economists in London, that 2012 will be a tough year in Europe.
We are looking at a climate of stagnation in Europe, with near zero, or slightly negative growth across the region,” she said. However, she dismissed pessimistic predictions of a disorderly default on sovereign debt, or the possibility of a break-up of the euro. “There will be no exit from the euro, and no major credit event in the eurozone in 2012. Europe will have to go through a painful process of fiscal consolidation, eventually moving toward fiscal union,” she predicts.
The troubling outlook of Turkey’s biggest trading partner, the European Union, combined with a reliance on foreign funding to plug the country’s widening current account deficit (CAD), has led some analysts, such as Standard & Poor’s and Capital Economics, to believe that Turkey’s economy will experience a hard landing after stellar growth in 2011. HSBC has no such fears, according to Metiner.
Increasing financial instability in Europe has weighed on investor risk appetite in 2011. As investors look to historically safe assets to park their money, Turkey suffered a sell-off of Turkish equities in July and again in October and November, leaving the İstanbul Stock Exchange (İMKB) more than 25 percent off its May high, while the Turkish lira has experienced a slide against the dollar.
However, the compelling overarching story of Turkey’s economy, with a stable fiscal position and over 10 percent growth in the first half of 2011, driven by increasing domestic demand, has continued to attract the interest of long-term investors, with foreign direct investment (FDI) already surpassing 2010 levels, at $10.9 billion for the first three quarters of 2011.
Metiner said this positive trend will continue in 2012, with Turkey receiving “FDI of over $12 billion” next year. Moreover, the damper domestic demand in 2012 will ease growth in the rising CAD to a more manageable 6.6 percent of gross domestic product (GDP), according to Metiner.
Weakness within Europe -- the source of nearly 90 percent of Turkey’s FDI in the first nine months this year -- will prove a constraint, as funding difficulties and the process of sovereign and corporate deleveraging continues to take effect, preventing a return to the historic $22 billion of FDI Turkey attracted in 2007.
Yet Metiner expressed confidence that the same process of diversification that has occurred in Turkey’s international trade will be replicated with FDI. Signs of growing Middle Eastern investor interest in the country are already evident, with Saudi tour operators currently in the country, to explore investment opportunities in the tourism sector, while the Qatari group Retaj Marketing & Project Management announced plans last week for $500 million of investment in Turkey’s tourism industry.
HSBC prioritizes Turkey
HSBC Turkey head of strategy planning Evren Altıok, speaking with Today’s Zaman, reiterated HSBC Group CEO Stuart Gulliver’s comments that “Turkey is one of the fastest growing regions in the world.” The tougher financial climate since 2007 “has meant a retraction from markets and businesses in which we don’t have scale,” Altıok added. This refocus has turned HSBC’s attention to growing its retail and business banking operations in the country. HSBC plans to increase its retail customer base from “3.5 million to 5 million customers” by 2014, according to Altıok. He said HSBC will open 30 new branches from 2012, and increase its product offerings in business banking to attract the growing small to medium-sized enterprises (SME) that have spurred Turkey’s dynamic growth in recent years.
The favorable geographic position of Turkey, along with political stability experienced under the ruling Justice and Development Party’s (AK Party) over nine-year tenure, looks set to safeguard the country somewhat from economic headwinds in Europe. As a “leading global bank with particular knowledge in trade and a desire to grow our customer base,” Turkey is particularly attractive, said Toygun Özmen, HSBC Turkey’s head of trade and supply chain. The country was positioned to benefit from increasing global trade flows from emerging economies, with a strategic geopolitical position as a bridge between Asia and Europe, Özmen added.