Is a Recovery Possible in the Economy in 2023 despite the Elections?
Turkey performed well last year in terms of growth and balance of payments. The increase in tourism revenues played an important role in easing external financing pressures. In the mean time, exports to Russia increased significantly.
While global economies are going through an inflationary process, just like in Turkey, the tight monetary policy of central banks brings with it the risk of recession on a global scale. Just as economies were affected by the abundance created by loose monetary policy during the pandemic period, they are now under the impact of the recession brought about by tight monetary policy. Therefore, I see a recession as likely throughout 2023.
The Eurozone and the UK had already entered recession at the end of last year. Although not in sync with Europe, the US is also likely to enter a recession in the second half of this year, albeit a milder one than Europe as a result of the Fed's tightening policy. China, which has softened its zero covid policy, has resumed its growth trend. Based on current data, I believe that global growth, excluding China, will be on a downward trend.
The Russia-Ukraine war and the recent escalation of US-China tensions over Taiwan are seen as major risks to the global economy and trade. In addition to global risks, Turkey is trying to establish a predictable monetary and exchange rate policy. Turkey, which does not have an energy security problem but continues to have a current account balance problem and a need for floating money, continues to seek to control high inflation in parallel with Europe. On the other hand, rising costs due to inflation and rising foreign exchange prices have the potential to cause significant damage to our economy. Despite all the negativity, I find the increasing export data promising and pleasing. However, I see it as imperative that our search for balancing our foreign trade deficit, which has become chronic due to the fact that we are a commodity importing country, with tourism revenues and a competitive exchange rate continues this year.
In fact, Turkey performed well last year in terms of growth and balance of payments. The increase in tourism revenues played an important role in easing external financing pressures. In the mean time, exports to Russia increased significantly.
As a result of diplomatic efforts last year, relations with the Gulf countries have once again turned positive. This served to bring Gulf capital into play in strengthening Turkey's gross foreign exchange reserve position. I believe that Gulf sovereign wealth funds will continue to look for investment opportunities in Turkey. I also believe that the postponement of some of the natural gas payments from Russia will play a role in easing external financing pressures.
I believe that Turkey should take advantage of its competitive positioning in the global value chain with its relatively low-cost and skilled labor force, as well as its geographical location, which provides logistical advantages. Turkish companies are undoubtedly looking for ways to increase their resilience in the shadow of uncertainties in economic activity. Unfortunately, the cost of capital for our companies is likely to remain high throughout this year. To overcome this, I believe there is a need for the government to provide incentives to reduce the cost of capital, especially for export-oriented companies.
Investors are taking a cautious stance as in all countries going through an election period. After this temporary period, I expect a general improvement in our economy starting from the second half of the year. I maintain my expectation that inflation will eventually decline in a controlled manner. I also believe that our export potential will continue to increase with the diversification of export markets. I believe that Turkish companies should focus their efforts on being part of the recovery trend in the economy by taking advantage of the global opportunities provided by the geopolitical position of our country.
In parallel with these efforts, I think we should focus on health tourism, which I see as a rising sector, because health service expenditures stand out as an area that is resistant to macro recession. In the healthcare sector, the introduction of technology, reducing costs and labor force, and improving efficiency and outcomes offer significant opportunities for our country. I believe that Turkey, which has renewed its health infrastructure with city hospitals and private health institutions, and has become a leading country in digital health and telemedicine services with its conscious investments in health technologies, will maintain its position as a health destination for European and Middle Eastern countries. In these years when the world's population is aging and the number of people reaching retirement age is increasing, I believe that with the right investment and the right strategies to be followed, health tourism can lead to an increase that will eliminate Turkey's current account balance problem in the coming years.
