01 Şubat 2021,SITUATION IN THE WORLD, Elevator Vizyon Magazine, All What You Are Looking For is On This Site


Global economy has completed the year 2018 with slowing signals, ongoing high risks and increasing uneasiness. After the duration of an excessively mild but stable growth of the world economy for 10 years, the signals of the decline of global economic activity increased the expectation of risks.

A big part of Black Swan scenarios, which have been revealed in the beginning of the year of 2018 in which optimism was still in the air. This thing can be expressed as “surprise developments which have great and unpredictable results in regards to financial markets” and these things happened all around the year with the observance of VIX /Volatility Index, also depicted as “fear indication” having shown a great increase.

The USA – China market war which created a global effect, the weakening of Chinese economy, the politics of central banks of developed countries, fluctuations in petrol prices due to the USA’s embargo on Iran, and the ongoing uncertainties in regards to the budget problems of European Governments and course of Brexit were the primary reasons of stress for markets in 2018

In the “Global Economy Expectations Report” which was issued by the World Bank on January 2019 under the title of “Storm Clouds Gathering”, it is explained that the expectations of global growth in 2019 was reduced from %3 to %2.9 due to the increasing risks. In the report, trade wars, tightening conditions of foreign indebtment, increasing leverage rates, and breakage of supply chains are listed as the primary risks for the world economy.

In the report, it is stated that, “International trade and production activities are reducing and finance markets in less developed countries are becoming heavily suppressed” and “Although the world economy has worked its best in 2018, it has lost its momentum. In 2019, the economical dynamics can be expected to diminish more”.

While the debt stock is gradually becoming heavier, increasing interests and drawbacks of incentives in the context of politics; overcoming all these problems is a real uncertainty In “The World in 2019” issued by The Economist magazine on December 2018, the main problem of the global economy for the next 12 months will be the debts reaching to %271 of the world’s gross domestic products is pointed out. The Economist remarked that the rise of either interest rates or debts will concoct “a toxic combination”.

The weakening currencies of developing countries with gradually increasing borrowing costs especially increases concerns. A report issued by OECD in November 2018 draws attention to the developing countries quickly losing their external financing. According to this report; the direct external financing to these countries dropped by %12 and regression rate finally reached to %30 between the years 2013-2016. Thus, direct external financing to the developing countries lowered to 750 billion US Dollar levels.

Western countries who are dealing with the global capitalism’s “homecoming” socioeconomic problems are now having antipopulist policies and results in a tendency of polarization in a new cold war.

Catching the attention with its collective debt, China, in which celebrated its 40th year of state-led market economy, is now due to “trade wars”, changed positions with the USA, which previously has been promoting China to exteriorization.

This tension between the USA and China, which was occupying the agenda of the global economy throughout 2018, might have been nullified a bit because of the 90 days truce proceeding until March 2019, but it continues to be a risk factor for the upcoming terms.

A petition made by HSBC including more than 8 thousand 500 companies around the world, shows the reasons of the pessimism of %31 of the participants as trade wars and high tariffs.

The companies are looking for business partners in their own domain now; the rate of European companies planning to grow in Asia region dropped from %26 to %13, and North American companies dropped from %33 to %15. The rate of Asian companies planning to grow in North America dropped from %29 to %21.

The situation in Turkey

The petition expresses that geopolitical risks are concerning a lot of companies and Russia, Germany and Turkey are the countries forerunning in the greatest geopolitical risk alarm.

Last year, in Turkey’s 5 years Credit Default Swap (CDS), there were big increases that were accelerated by geopolitical and economic developments. Assets of Turkey, just like many more developing countries, were affected by the powerful USD and increasing foreign exchange assets; and while weakening considerably because of the increasing risk perception, got disintegrated negatively from other developing country currencies.

Turkey’s CDS premium rose highly to 370 in the beginning of 2019, and with the support of global businesses, it has decreased to under 350 points on following days. In such a period, the developments in abroad are far from being supportive to Turkey. The continuation of FED’s increase in interest rates and geopolitical tension in Middle East still continuing in 2019 along with the USA – China trade war and sanctions to Iran; points out to a lot of upcoming drastic conditions.

Turkey shined out on the third quarter of 2017 as the world’s fastest growing economy by the rate of %11.1.  According to Turkish Statistics Institution’s third quarter of 2018 data, Growth rate of Turkey’s economy dropped with a significant shrinkage to %1.6.

In regards to the composition of its growth, it can be seen that foreign demand is determinant, domestic demand and disinvestment affects the economy adversely and, fixed capital investments effects are negative. For the upcoming terms, the decline in production of capital goods, which is determinant for the production capacity; has been noted in regards to the economic activity.

At the same term, the most significant contribution came from service sector. Besides the decline in industry, construction sector’s serious decline of growth in this term in regards to the previous term since 2015 especially drew a lot of attention. The growth of %6.9 on the first quarter of the year stayed in a very limited rate of %0.8. On the third quarter, a -%5.3 decline happened. The real estate activity happened on the first three quarters of the year, %3.4, %0.2 and %2.3 consecutively. It is expected that the shrinkage in construction sector is to continue.

At this stage, it is pointed that a shrinkage is happening in general economy; the expectance of Turkey’s competition of the year with approximately %3 growth rate with some shrinkage in the economy on the last quarter of 2018 has gaining importance by the domestic and foreign institutions.

On the other hand, in the final period of 2018 with some positive developments on the global scale, the decline in TL and interest are revocating along with a decline in inflation; a process of economic stabilization has begun. A regression caused by Tax reductions implemented for inflation, the fall on energy prices and shrinking domestic demand is seen. Year-end inflation, with the rate of %20.3 which has fallen short of New Economic Program’s (YEP) target of %20.8, it is noted that 2018’s inflation is yet above the average of past 14 years. TR Central Bank’s (TCMB) year-end target of 2019 for Turkey being %14.6 still shows the difficulty of the distance needed to travel.

The debate on TCMB’s cutting the rates of interest in inflation, which started during the last months of the year is seen by the experts as an “early debate”. Regarding the currency policies, it is advised that making no extra pressure on TL, and taking steps “when needed” in terms of interest for growth and loans is of great importance. After that, the first Currency Policies Board (PPL) Conference of 2019’s first on 16th of January, the remark of preserving the steady stance on monetary policy got favorable reception by markets and a probable interest rate cut happening on the second quarter of the year earliest gained importance.

On the “Global Economical Expectancies Report” issues by World’s Bank on January 2019, results of the Turkey’s economic growth for 2018 is (with 1 point drop) %3.5, for 2019 (with 2.4 points drop) %1.6 and for 2020 (with 1 point drop) %3. In the 2018 year end prediction, the World’s Bank shows the reasons; “high inflation and interest rates along with low reliance levels, decreasing consumption and investments” and predicts that 2021’s economic growth will rise to %4.2.

In the report, these determinations below were made for Turkey:

• Turkey’s economy is facing higher uncertainties in 2019, more than it is used to.

• YEP is building a good foundation to facilitate economic stability gradually.

• With the new policies structured upon the YEP, an orderly economic rebalancing may be ensured.

• While the inflation staying above the target rate and expectations being in rise, monetary policies should continue to stay strict.

• The steppes coming from the finance sector that will facilitate a gradual decrease in debts should accompany monetary policies.

• The critical factor that supports the process of decrease in debts is a strong frame that can restructure debts of companies.

• The frame that will restructure the debts of companies will also determine the “bumpy landing or an orderly restabilization” regarding the economy.


Moody’s report of “Global Macro View: 2019 – 2020” predicts the economic growths in developing countries will be slow and continuous in 2019 but economies of Turkey and Argentina, which are included in G-20, will face shrinking. Turkey expected shrinkage will last until the middle of 2019 along two quarters.

Near the end of 2018, the government prolonged the tax discounts applied to housing, furniture, white appliances and automotive sectors by three months. After that, a few temporary precautions have implemented. These include the electrical and natural gas supports to residences along with a discount of %10 to SME’s and businesses, electrical support to 2.5 domiciles, convenient consumer loans and cash advance options for debitors via Ziraat Bankası and installments to the debts of sports clubs, credit usage opportunity via Halk Bank for 350.000 artisans in 2019 with a total sum of 22 billion TL, 20 billion TL credit support to SME’s.

Turkey’s economy, with the presence of special sector being expert and flexible in crisis management, will surely get over this hard course. At this point, with all the negativity happening in the economy in 2018, the stabilization in current account balance, petrol prices not raising to frightful levels, recession scenario in the USA economy being real; the investors’ attention could turn to Turkey and thus, the external finance need could be decreased.

The economy of the world started 2018, which is the 10th year of Global Finance Crisis, with somewhat positive way but USA President Trump’s, aggressive and overprotective policies, USA Central Bank’s (FED) increase in interests and negative economic data coming from China has concluded the year with uneasiness.

Turkey Contractors Association’s Construction Sector Report includes these remarks in terms of general economy and sector:

Turkey will also benefit from the increasing attention on foreign funds

Analysis states that in the last days, with the effect of the sense of FED’s interests not skyrocketing contrary to belief, and pointing out that Turkey is starting to benefit from foreign funds, Turkey, having a special sector which are expert and flexible in terms of crisis management, will surely get over this tough course. Despite all those geopolitical risks and trade wars, Turkish companies had undertook projects with a price of 19.9 billion US Dollars’ worth and the total number of 9.600 projects undertaken in the world by 123 countries had a value closer to 380 billion US Dollar’s.

As stated in the report, countries with most jobs undertaken in 2018 were respectively; Russia (%20), Saudi Arabia (%15.5) and Qatar (%10.4), and “After the normalization of our relationship with Russia, it has become the leader in market ratings in terms of our contractor services. It is predicted that Russia will, in no time, reach the average 5-6 billion USD/year potential project value back in 2012-2015” information is shared.

In the analysis, the performance of abroad contractor services are summed up as follows: “It is seen that abroad contractor services have reached the highest levels in 2012-2015 with a yearly 30 billion USD. However with the effects of the political and economic developments in the world, decrease in petrol prices and a crisis happening with Russia, this number regressed to 14 – 15 billion USD/Year during 2016 – 2017 period. In abroad, the yearly project balance shows a movement to 20 – 30 billion USD levels.”

World’s construction sector will rise to 700 billion Dollars

ENR, which is considered a reference in the world (Engineering News Record) data shows that in the past terms, the construction sector being one of the most affected by economic uncertainties have raised its momentum since 2017 again to reach 482 billion USD with a rise of %3.1. The market size of international contractor’s market is expected to rise to 700 billion USD levels in 2030s.

The big aim of Turkish contractors is to get a %7 share

It is the primary target of this sector to have a weight on the market and be leader of its region on the 100th year of our Republic, along with “Turkish Contractorship” brand being formed and undertaking projects abroad with 35 billion Dollar’s mark. It is also aimed that the share our companies take will rise to %7 levels in 2030s and in other words, reaching 50 billion USD levels per year.

Positive signals are coming from Iraq

On the forthcoming period, there are a variety of variables that can affect abroad construction market. Foremost among these are levels of energy prices in Saudi Arabia, powerful references in markets with investment environments and financing conditions Turkish companies have in countries like Algeria. Russia Federation and Iraq will preserve its importance in the sector in 2019. The Iraqi government, which have formed in the end of last year despite not having assignments yet, signals a more positive era with the public improvement made along the country and the increase in life quality. The developments in these regards and current security issues getting taken care of will facilitate our companies to undertake projects again near Baghdad region and primarily Basra in Iraq. This situation also facilitates the Iraq companies paying their unpaid collected payments and our companies finishing their projects there. Accordingly, facilitation of the peace environment and stability again in Iraq and Syria is of utmost importance because in regards to the initiation of “peace economy”.