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Turkish exporters are calling for relief measures and financial support, with rising production costs forcing many companies to sell at a loss, even as the country’s exports hit record heights. 

The Türkiye Exporters Assembly (TİM), which represents over 140,000 exporters across 27 sectors, revealed last week that exports for July totalled a record US$22.5bn, 14% higher than the same month last year. 

Based on average figures for January to July, the country is on course to hit US$255bn-worth of exports in 2024, just shy of TİM’s US$267bn full-year target. 

The findings would appear to put Turkey firmly on course to fulfil ambitions set out during a trade  boom three years ago, when the association said the country had been “promoted to a new league in exports”. 

However, for TİM chairman Mustafa Gültepe, the latest figures are no cause for celebration, with exporters facing a dangerous cocktail of inflation, high interest rates and a weakening Turkish lira. 

“I must underline that we have reached this level with the great sacrifices of our exporters,” Gültepe says. “Our companies are forced to take orders at cost, or even at a loss, to keep the wheels turning and not lose customers. This is, of course, not sustainable.” 

The lira has dropped around 20% in value against the dollar over the past year, while in July inflation reached 62%. As of press time, the central bank’s main interest rate stands at 50%, up from 8.5% in June last year. 

TİM says exporters also face high energy costs, as well as heavy taxes on imports of raw materials and intermediate goods. 

“Production costs in Türkiye are very high. We are 40-50% more expensive in dollar terms than our Asian competitors. We are also 15-20% more expensive than some countries in Europe,” says Gültepe. 

“Our production costs have increased by at least 100% annually. In some sectors, cost increases exceed 120%. In the same period, the increase in the dollar was only about 23%. As long as this imbalance between input costs and the exchange rate continues, exporters will be out of the game.” 

In effect, exporters have been unable to adjust their sales prices in foreign currency terms, despite the “dramatic” increase in local costs, says Muzaffer Aksoy, chief executive of Bank ABC Turkey. 

“We may see some drops in Turkish exports especially in low-margin sectors, and we see many Turkish investors investing in low-cost markets, even in Europe, to compete,” he tells GTR. 

Aksoy says the bank is following market conditions closely and expects Turkey’s ratings to be upgraded, which should bring economic improvements. 

“But Turkey shouldn’t lose this opportunity by becoming too expensive,” he says. 

Turkey has already lost market share in nine of the goods-exporting sectors monitored by TİM. For example, its exports from its historically strong apparel sector were US$1.2bn lower in the first half of this year compared to the same period in 2023, a drop of nearly 13%. 

TİM recommends several potential measures that could bring relief to exporters, including moving the exchange rate in parallel with inflation, and lessening the tax burden on imports of materials that cannot be produced domestically. 

The association calls for energy costs to be minimised and for a review on regulations that impose burdens on producers and exporters. 

Work is also underway to improve financing options for Turkish exporters. 

Support from Türk Eximbank, the country’s export credit agency, has proven “very meaningful during difficult times”, TİM says. 

“However, to overcome this process with minimal damage and prepare for the future, financing opportunities under more favourable conditions should be created.” 

Efforts are currently underway to restructure Türk Ticaret Bankası, a trade lender established more than a century ago and acquired in March 2023 by Export Development Inc – an entity established by TİM in partnership with several banks and industry groups. 

Gültepe says the bank is due to start operations by the end of this year, with a focus on lending to exporters having difficulty accessing trade finance.