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LOOKING FOR DIFFERENT COUNTRIES? D&B Country Risk Services provide analysis on over 130 countries worldwide which are available to be purchased online. If you wish to order individual reports using your D&B contract subscription please click the link and follow the on screen instructions, alternately please contact Customer Services at your local D&B office. For further information please e-mail us at CountryRisk@dnb.com |
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The 'DB' risk indicator provides a comparative, cross-border assessment of the risk of doing business in a country and encapsulates the risk that country-wide factors pose to the predictability of export payments and investment returns over a two year time horizon. The 'DB' risk indicator is a composite index of four over-arching country risk categories:
Political risk - internal and external security situation, policy competency and consistency, and other such factors that determine whether a country fosters an enabling business environment;
Commercial risk - the sanctity of contract, judicial competence, regulatory transparency, degree of systemic corruption, and other such factors that determine whether the business environment facilitates the conduct of commercial transactions;
External risk - the current account balance, capital flows, FX reserves, size of external debt and all such factors that determine whether a country can generate enough FX to meet its trade and foreign investment liabilities;
Macroeconomic risk - the inflation rate, government balance, money supply growth and all such macroeconomic factors that determine whether a country is able to deliver sustainable economic growth to provide further expansion in business opportunities.
The DB risk indicator is divided into seven bands, ranging from DB1 through DB7. Each band is subdivided into quartiles (a-d), with an 'a' designation representing slightly less risk than a 'b' designation and so on. Only the DB7 indicator is not divided into quartiles.
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Country Overview:Turkey lies at the eastern end of the Mediterranean, bridging southeast Europe to the Middle East. Its strategic location affords Turkey control over the Turkish straits (Bosporus, Sea of Marmara and the Dardanelles), which link the Black and Aegean Seas. The Justice & Development Party (AKP), which has moderate Islamic roots, consolidated its political power in the 2007 parliamentary election; it also controls the presidency. However, the establishment views the AKP as a threat to the secular traditions of the country’s founder, Kemel Ataturk. The military, which views itself as the guardian of these traditions, has overthrown governments in 1960, 1971 and 1980, before stepping aside. Relations with Iraq will remain strained by the presence of Kurdish separatists staging attacks on Turkey from northern Iraq. The AKP is economically liberal, pro-business and pro-EU entry. The dynamic economy is a mix of modern industry and commerce, as well as a traditional agriculture sector. The private sector is strong and growing rapidly as the state withdraws from business activities. |
| Minimum Terms: | LC |
The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country.
| Recommended Terms: | LC |
D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms.
| Usual Terms: | 30-90 days |
Normal period of credit associated with transactions with companies in the stated country.
| Local Delays: | 1-3 months |
The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.
| FX/Bank Delays: | 1-3 months |
The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.
According to D&B’s latest proprietary cross-border payments performance data, 50.3% of payments arrived 30 or more days over terms in the year to end-Q3 2009. Around 63.0% of payments were paid promptly in the same period, while 17.0% of payments were paid 60 or more days over terms. Some 2.2% of payments were severely delinquent after a delay of 120 days or longer. In view of the payments performance of companies operating in Turkey, D&B recommends the use of LC terms when trading with counterparties in the country. Meanwhile, the 2009/10 Global Competitiveness Report by the World Economic Forum places Turkey 61st out of 133 countries. The fact that Turkey trails many comparator countries is a concern.
| US Eximbank | Full cover available |
| Atradius | ST cover available |
| ECGD | Full cover available |
| Euler Hermes UK | ST cover available, restrictions may apply |
| 2006 | 2007 | 2008 | 2009f | 2010f | |
| Real GDP growth, % | 6.9 | 4.7 | 0.9 | -5.7 | 3.0 |
| Inflation, annual ave, % | 10.5 | 8.8 | 10.4 | 6.1 | 6.7 |
| Govt balance, % GDP | -0.6 | -1.6 | -1.8 | -6.1 | -5.2 |
| Unemployment, % | 9.9 | 9.8 | 10.6 | 14.7 | 13.6 |
| C/A balance, % GDP | -6.0 | -5.9 | -5.7 | -0.8 | -1.6 |
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Exchange Rates
(London, 12 Oct 09)
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Local Currency
(Turkish lira [TRY]: USD)
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Industrial Production Index
(2005=100)
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| Data Table | ||||||
| Jan 09 | Feb 09 | Mar 09 | Apr 09 | May 09 | Jun 09 | Jul 09 |
| 88.5 | 84.6 | 96.0 | 97.4 | 102.4 | 109.2 | 110.3 |
We have placed Turkey on review for a risk indicator upgrade this month in the belief that the worst of the economic downturn has passed and the government has a credible plan in place to deal with the country’s debt situation. In the absence of any financial support from the IMF (discussions over a lending programme have faltered in recent months), the authorities have unveiled a medium-term framework to deal with the public finances, boost private sector activity and restore economic growth. The ultimate aim is to stabilise the public debt-to-GDP ratio by 2011 and reduce it thereafter, with the introduction of a fiscal rule to ensure that prudent fiscal targets are maintained over the longer term. Although D&B believes these targets will prove difficult to meet, and that they require deeper structural reforms to deal more effectively with Turkey’s fiscal problems, the fact that the government is pressing on with a strategy independently of the IMF is encouraging.
We still expect the economy to post a severe contraction in 2009, although real growth may resume as early as Q4; our current forecast stands at a 5.7% average decline in real GDP. We also maintain a cautious outlook for 2010. However, with low-base effects, reviving industrial production (including a seasonally adjusted month-on-month rise of 0.8% in July), interest rate cuts and the government’s fiscal support to factor in, we have revised upwards our forecast for GDP growth next year to 3.0%. The central bank’s Monetary Policy Committee is assisting the recovery, having further relaxed monetary policy in September. The overnight borrowing rate was lowered by 50 basis points to 7.25% and the overnight lending rate to 9.75%. This was accompanied by similar reductions in the late liquidity window and in overnight borrowing on one-week maturities for primary dealers in the repo market. These cuts are an ‘insurance policy’ to provide sufficient liquidity and help external and domestic demand to recuperate; they also illustrate confidence in the inflation outlook. We believe that a further interest rate cut is possible but if that does not materialise, the central bank has indicated that it will maintain an ‘easing bias’ for a considerable period of time.
As an indication of our growing confidence in Turkey as a prospective business location, the central bank’s latest Business Tendency Survey (for September 2009) shows rising orders and employment expectations. Perceptions of the general business situation, which were eroded by the global credit crunch in Q4 2009, have strengthened, albeit unevenly, with confidence slipping in July only to return in August and September. Based on these results, and a perceived improvement in cash flow, our belief is that the payments climate will slowly strengthen throughout our forecast period.
DEFINITIONS
Minimum Terms:
The minimum form of documentation or trading method that D&B advises its customers to consider when pursuing export trade with the stated country.
Recommended Terms:
D&B's recommended means of payment. The use of recommended terms, which are generally more stringent than minimum terms, is appropriate when a customer's payment performance cannot be easily assessed or when an exporter may wish to limit the risk associated with a transaction made on minimum terms.
Usual Terms:
Normal period of credit associated with transactions with companies in the stated country.
Local Delays:
The time taken beyond agreed terms for a customer to deposit money in their local bank as payment for imports.
F/X Bank Delays:
The average time between the placement of payment by the importer in the local banking system and the receipt of funds by the exporter. Such delays may be dependent on FX controls, FX availability and the efficiency of the local banking system.
C/A (current account) balance, % GDP:
Part of the balance of payments that records a nation's exports and imports of goods and services, and income and transfer payments.
DSR (debt service ratio), %:
Annual interest and principal payments on a country's external debts as a percentage of exports of goods and services.
Govt balance, % GDP:
The balance of government expenditure and receipts.
Real GDP growth, %:
GDP adjusted for inflation.
Inflation, %:
The increase in prices over a given period.
GLOSSARY
CiA Cash in Advance
CLC Confirmed Letter of Credit
CWP Claims Waiting Period
FX Foreign Exchange
LC Letter of Credit
LT Long term
MT Medium term
OA Open Account
SD Sight Draft
ST Short term
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