The Turkish Contractors Association (TMB) released its 2017 Q3 economic and sectoral analysis, which is followed by the construction sector and financial circles with interest. The October 2017 analysis entitled “In the Pendulum of Economic Development and Political Problems” included the expression “The global economy is in a pendulum-like motion swinging under the pressure of geopolitical risks and a rapid growth that has for the last few years been supported by monetary policies.”
The analysis also stated that “Despite the global growth being at the highest level seen since 2011 with 3.5 percent, the increasing political risks and uncertainty factors are causing the global activity to skid in a sustainable and steady growth path.”
It was also underlined that the overseas construction business sector – which is one of the sectors most heavily affected by the general conjuncture and, in particular, by the developments in the main markets – achieved a relative recovery by the end of September 2017 compared to the same period of 2016. The analysis also included data from the Ministry of Economy which indicated that 65 new projects amounting to 4.1 billion USD were undertaken in overseas countries within the first nine months of 2016, as well as another 120 new projects amounting to 7.7 billion USD were undertaken within the same period of 2017.
Here are some brief highlights from the TMB October 2017 report with regard to the general economy and the sector:
Recovery In Economy: The data having been revealed for the Turkish economy shows that the economic activity has been enjoying a substantial recovery. The growth data for the first half of 2017 indicated an economic performance well above the expected level, and the contribution made in the first half of the year by the net export and investment items to the economy that has long been growing based on the domestic demand and consumption was also seen as a positive development.
Improvement In The Investment Environment: It is emphasized that the investment environment should be improved in order to achieve an environment that will increase the long-term direct investment in addition to short-term capital movements, in other words, that will support the economy in terms of production, export, and employment. In a time when uncertainties are at such a high level, it is of vital importance to take efficient actions in order to improve the country’s development potential and make the economic growth sustainable.
A Rapid Growth Trend In Construction: The construction sector once again achieved a rapid growth trend in 2016. In accordance with the revision that the Turkish Statistical Institute (TÜİK) made in the growth data, GDP achieved a growth by 3.2 percent whereas the construction sector enjoyed a growth by 5.4 percent during the entire 2016. In the first quarter of 2017, GDP grew by 5.2 percent and the construction sector grew by 6.0 percent. The second quarter of the year, on the other hand, saw that the Turkish economy grew by 5.1 percent and that the construction sector grew by 6.8 percent. Therefore the general economy grew by 5.1 percent and the construction sector grew by 6.4 percent in the first half of 2017.
Risk Factors Increase For Infrastructure Projects: It is thought that the public investments and the urban transformation process will continue to support the growth momentum in the construction sector in the upcoming periods as well. On the other hand, market conditions are also important for the course of the infrastructure projects with high financial requirements. In this sense, there are some situations increasing the risk factors regarding the construction investments such as the shrinkages that are estimated to be seen in the global liquidity conditions in the upcoming period, the increasing trend in the geopolitical risks, and the foreign exchange rates that are being in rise, as well as the developments seen in interests.
Construction Sector Is Above The General Economic Performance: When the investment opportunities and financial risks regarding the sector are evaluated together it is expected for the construction sector to continue its growth trend above the level of the general economic performance in the upcoming period.
Housing Enjoys An Accelerated Momentum: The momentum seen in the housing production, which comprises more than the half of the total construction sector production in Turkey, accelerated in the previous period and the building construction sub-segment increased its share in the total construction activities. The development of new residential areas in parallel with the rapid urbanization, as well as the highly wide-scope projects such as urban transformation projects led to a significant increase in the housing segment activity.
Discount In Title Deed Fees Boosts Sales: In the previous period, also with the help of the measures taken, the total sales increased by 10.1 percent on an annual basis in the total of the first nine months of the year. It is underlined that the main factor that helped sales increase by a whopping 29 percent on an annual basis particularly in September to reach 140,000 was the title deed fee discount, which entered in force in March and ended on September 30.
A Vat Rate Of 8% Should Continue: When the current economic conjuncture, real estate stock, and economic expectations are taken into consideration, it is of great importance to maintain the eight percent-VAT rate practice at least for six months in order to eliminate the housing stock.
A $350 Billion Worth Project: The total price of the 9,100 projects undertaken by the Turkish construction companies in 118 countries within a period spanning from 1972 to the end of September 2017 reached 350 billion USD. According to the country distribution of the projects undertaken since the beginning of the overseas construction services, the top five countries are Russia (19.8%), Turkmenistan (13.5%), Libya (8.3%), Iraq (7.1%), and Kazakhstan (6.3%).
Increase In Energy Prices Can Produce Positive Results: In the upcoming period, the energy prices that gained a certain level of momentum increase may positively reflect on the investment environment and financial conditions in the markets such as the Saudi Arabian, Algerian, and Turkmenistan markets where the Turkish overseas construction services boast highly strong references.
Better Than 2016: With a gradual normalization in the relations with Russia, as well as with the use of the opportunities available in potential markets such as the Sub-Saharan African market in particular, we hope that, in terms of the development of the overseas construction services, the upcoming period will be more positive than the year 2016 when the momentum gained in the last ten years was unfortunately lost.
