The export climate for Turkish manufacturers overall remained favorable in December, official data showed Monday, driven by demand conditions in some of the country’s top export markets, though the omicron variant and related disruptions are clouding the outlook.
Turkey's Manufacturing Export Climate Index stood at 53.9 in December, signaling robust strengthening in the health of the export climate and extending the current sequence of improvement to 11 months, according to a survey from the Istanbul Chamber of Industry (ISO) and London-based global data firm IHS Markit.
Though it came in lower than 55.1 in November and stood at its lowest level since last February, the reading remained above the threshold level of 50 that separates growth from contraction. The Turkey Manufacturing Export Climate Index is calculated by weighting together national Purchasing Managers’ Index (PMI) data on output trends from PMI surveys. Weights are derived from statistics on the relative importance of individual trading partners’ contributions to the exports of Turkish manufacturers.
The panel said although the export climate for the Turkish manufacturers continued to improve overall at the end of 2021, the rate at which demand conditions strengthened was the softest in 10 months amid the emergence of the omicron variant and pandemic-related disruptions in some key export markets.
After hitting in 2020, the pandemic hurt trade with Ankara’s biggest partners, however, Turkey’s exports ended 2021 with an all-time high, jumping by nearly 33% to $225.4 billion (TL 3.1 trillion), far exceeding the country’s medium-term program goal, according to official data.
The performance prompted an upward revision of the export target for 2022 to $250 billion from $231 billion.
The surge in foreign sales helped narrow the trade deficit by 7.8% year-over-year to $45.9 billion. Imports were up 23.6% to around $271.4 billion in 2021, while the overall foreign trade volume leaped to $496.7 billion.
By October, the country’s share in global exports had surpassed 1%, a first for the country that marked a more than sixfold rise over the past two decades.
The United States remained an important, growing source of demand in December, the panel said. Business activity continued to increase sharply, with the rate of growth ticking down only fractionally from that seen in November, it noted.
The U.S. is one of the main export destinations for Turkish manufacturers, accounting for around 6% of all exports.
Yet, the panel pointed to a pronounced slowdown in Europe, where health care systems are being strained once again by the rapid spread of the omicron variant, with large numbers of staff members falling ill or self-isolating, and experts predicting that the peak of infections is yet to come.
“There were signs of a more pronounced slowdown in Europe, however, where the COVID-19 pandemic in general and emergence of the omicron variant during December impacted activity," it added.
Another important market, Germany saw output decrease fractionally, thereby ending a 17-month sequence of expansion. The U.K., the second-largest export market for Turkish manufacturers, saw growth of activity slow markedly to the weakest in the current 10n-month sequence of rising output.
Softer increases in activity were also registered in Italy, France, Spain, the Netherlands and Ireland.
On the other hand, business activity contracted in South Africa, where the omicron variant was first identified, but the market represents less than 1% of Turkish manufacturing exports.
Growth picked up in parts of Central and Eastern Europe, including Poland and the Czech Republic, while Russia posted a marginal increase in activity following two months of contraction.
Sharp expansions were recorded again in some Middle Eastern countries, including the United Arab Emirates (UAE), Saudi Arabia and Qatar.
The rise in output in the UAE was the strongest in just under two-and-a-half years. Other countries in the region continued to struggle, however, with Egypt and Lebanon posting further reductions in activity.
“Economic performance in Asia was generally positive at the end of the year as economies in the region continued to recover from the delta wave which caused disruption earlier in 2021,” the panel noted.
Elaborating on the reading, Andrew Harker, economics director at IHS Markit, said the omicron variant posed a key risk to growth for the coming period.
“The global economy ended 2021 in a sadly familiar position, with the COVID-19 pandemic again dictating economic trends. The emergence of the Omicron variant acted to disrupt activity in those countries where it had begun to take hold, and provides a key risk to growth at the start of 2022 should it spread to more parts of the world,” Harker said.
The Turkey Manufacturing Export Climate Index is calculated by weighting together national Purchasing Managers’ Index (PMI) data on output trends from PMI surveys. Weights are derived from statistics on the relative importance of individual trading partners’ contributions to the exports of Turkish manufacturers.
