A brief report about chemical sector in Turkey
Turkey has a fast developing industry and chemicals are widely used in this country. There are a lot of companies involved in importation of chemicals into Turkey.
Due to the perception of risk on global basis however, there certainly is a slowdown situation in the sector as with all other segments in the economy.
Winters are not the best time for chemical business anyway but the stagnancy in question at the moment is mainly due to the prospective crisis supposed to be on the way. In fact business today is about 25 percent less in volume compared to its normal course.
Another factor is the sector is short of finance at the moment which in return pulls down sales in the market.
People involved in the sector do not spend much effort to do more business at the moment as they do not want to take any likely risks.
When we look at the approach of the government to this issue in general, we see they would like the consumption economy to slow down, a little as well.
In fact, that is exactly why the government has raised the existing taxes on top of new taxes introduced.
This situation certainly reflects to consumption at the end of the day and consequently the economy goes into recession.
On the other hand, it could easily be said business owners are always alert that Turkey may have to face another economic crisis and they are experienced enough to manage their businesses accordingly. The sector has wisdom not to target growth in such recession periods.
In fact this is exactly in compliance with the government’s current policy.
The question is “How long can the sector stand this situation?”. Some maintain “the sector can go on like this for a few years, easily”. This could be true because we know the Turkish economy is much stronger than the economy in EU countries, at the moment.
To recap, provided companies and people cut down on expenditures the Turkish economy is strong enough to go through another global crisis.
On the other hand the sector like with all other sectors in Turkey is using credit from the banks. The most important thing is that the interest rates should not go up. Because if they do go up, companies may not be able to cope with the possible challenges.
The banks do not want to sell money to companies at the moment.If companies do not find enough money to continue the business in the sector may rock bottom and this will have a great impact on the Turkish economy on macro basis.
The profit margins in the sector is about 10 percent on average which is a factor why the companies in the sector have to watch out for their budgets and expenses very closely. They do not have much room to move.
But the sector with its vast experience from previous crisis situations is capable of challenging a new negative situation expected to be imported from Europe.
SOURCE: INTERVIEW WITH BUSINESS OWNERS IN THE SECTOR