Are we to revise global expectations?

As you may remember, I tried to give you some insight about the latest developments with Coronavirus. Today, I intend to tackle this issue rather from a commercial and economic perspective, obviously without giving into too much despair.

We heard the news about the cancellation of top events in Europe due to coronavirus health risks, including the Mobile World Congress, the world’s largest exhibition for the mobile industry.

It looks like the delay in introducing new products into market will contribute to negative net profit margins, not to mention the fact that countries that generate major revenue from tourism will suffer economic losses. If we weren’t dealing with this coronavirus right now, global GDP growth would reach 3.3% in 2020. GDP growth in Southeast Asia, on the other hand, was forecasted around 4.7%. As a matter of fact, if things don’t improve soon, we will have to decrease all our expectation by 0.2 to 0.4 points.

The expectations for the future of the World Trade have been quite positive indeed. Last year, global trade has grown by 0.3% on volume basis. But, there has been a 3% decline on a value basis, which means more products have been sold for lower prices. And this year’s pre-outbreak expectations were as follows: 2.5% rise on a volume basis and 3% rise on a value basis were expected. That is to say, people were expecting export prices to go up for the first time in a long time. But, under the circumstances, these figures will have to get revised as well. In the meantime, we should also expect 0.5 point decline on a volume basis and 1 point decline on a value basis.

“Will Turkey take advantage of the situation?”

According to some experts, several fashion retailers in coronavirus-hit China may shift production to Turkey, which would result in 0.5 point rise in Turkey’s GDP. Yesterday, I had the chance to talk with some Turkish outfit exporters. They too confirmed the significant rise in demand for Turkish manufacturing services, but complained about the fact that most Turkish manufacturing facilities seriously lack capacity. The relatively cheaper brands and those that manufacture goods for chain stores seem to have higher hopes. There’s a high likelihood that the manufacturing of simple products with low value added will be undertaken by Turkish companies, which are sadly dependent on imported raw materials and intermediate goods. The European companies that normally sell raw materials or intermediate goods to China seem not to have shifted production to elsewhere yet.

In short, as China’s manufacturing slowdown continues, many sectors in Turkey may use proximity advantages to make good profit. But these sectors hardly create high value added. And these are not high-tech products we’re talking about. Nevertheless, I would like to hope that all these developments will help Turkish economy as it is going through some tough times right now.

By the way, I have told you, even before the release of industrial data yesterday, that Turkey would finish 2019 with a GDP growth around 0.4% to 0.7%. Now, I’m setting my expectations even higher, to some point between 0.6% and 1.0%.