On the last day of August, Turkey unveiled its economic growth figures for the second quarter of 2023, revealing a commendable expansion of 3.8%. While this news might have initially sparked optimism, it is met with a sobering acknowledgment that the country’s economic momentum could face challenges in the months ahead. Factors contributing to this potential slowdown include recent interest rate hikes and a gradual waning of the post-election fervour following the re-election of President Recep Tayyip Erdoğan in May.
Amid this nuanced economic landscape, there are encouraging signs that Turkey’s foreign direct investment (FDI) prospects are on an upward trajectory. This resurgence coincides with President Erdoğan’s strategic economic and foreign policy adjustments in the wake of his electoral victory. These shifts involve the appointment of a new finance minister and central bank governor, who have displayed a commitment to conventional economic policies. Additionally, Turkey has fostered closer ties with Western nations, notably endorsing Sweden’s NATO membership and rekindling discussions concerning its potential European Union (EU) accession.
Erdoğan’s administration has also exhibited a proactive approach towards strengthening relationships in the Middle East. In particular, diplomatic and trade relations between Turkey and the United Arab Emirates (UAE) have witnessed a marked upswing. In May, both nations ratified the UAE-Turkey Comprehensive Economic Partnership Agreement, aiming to elevate bilateral trade to a substantial $40 billion over the next five years. During President Erdoğan’s visit to Abu Dhabi in July, a series of bilateral agreements were signed, collectively valued at approximately $51 billion.
In essence, these developments underscore a more outward-looking agenda for Turkey’s leadership. Initial indications suggest that investors are responding positively to these changes, as evidenced by four significant deals announced in the middle of 2023.
The first of these deals features BASF, a multinational corporation headquartered in Germany, announcing a doubling of its production capacity for water-soluble dispersants based on acrylic acid at its Dilovasi facility in Turkey. This expansion, set to be operational by the end of the third quarter in 2023, aims to bolster BASF’s support for customers in the detergent, cleaning, and chemical processing sectors across Europe, the Middle East, and Africa.
The second deal showcases Australia-based Seawind Catamarans’ plans to establish a production facility and European service centre in Izmir, a city on Turkey’s Aegean coast. This facility will focus on manufacturing the Seawind 1170 for the European market.
In the third deal, U.S.-based motor and generator manufacturer WEG has unveiled plans to expand its operations in eastern Europe and southwest Asia. The company will inaugurate a new 7,000 square meter electric motor plant in Dilovasi, dedicated to providing technical support and product assembly.
Finally, Germany-based Böllhoff, a manufacturer specialising in fasteners and industrial processing systems, has announced its intention to inaugurate a factory in Izmir, representing a substantial investment of Tl600 million, with operations slated to commence by June 2023.
While Turkey faces economic headwinds, the resurgence of foreign investment and the signing of substantial international agreements signal a nation determined to seize opportunities and navigate the challenges on the path to sustainable growth. The global business community will keenly watch how these developments unfold in the dynamic Turkish market.