The Turkish apparel industry’s exports are expected by industry insiders to contract 10% this year on weak global demand and an over-valued lira.
Industry representatives were pessimistic, saying the situation on export markets hit by cost of living crises was not likely to improve even across next year, with orders to remain low in 2024.
The Turkish apparel industry’s export revenues amounted to $21.2bn in 2022.
People from the sector noted that foreign exchange rates have not increased as much as the local inflation rate. That has put pressure on exporters, eroding their competitiveness.
Spanish fast fashion giant Inditex, which sources between 5% to 20% of its supplies from Turkey, has plans to shift orders to other countries, according to business daily Ekonomi.
The second hike of the year of Turkey’s minimum wage, which took effect at the start of July, wiped out potential advantages from the weakened lira, said Ramazan Kaya, president of the Turkish Clothing Manufacturers’ Association, TGSD.
“We are now receiving orders for 2024. Today, the euro/lira rate is around 30. Let’s assume that the minimum wage will be hiked by another 50% at the start of 2024. Will the euro/lira rate go up to 45? No, it will not,” he said, adding that other costs were also on the rise.
The size of the local apparel industry stands at around $50bn, including exports worth $20bn. There were 42,000 companies operating in the sector with more than 670,000 employees as of April.
The capacity usage rate (CUR) in the industry declined to 77.6% in June.
Separately, the global downturn is also hitting Turkey’s white goods industry.
While white goods sales in Turkey rose by 18% y/y in the first half of 2023, exports of white goods in the six months were down 13% y/y, according to the business group TURKBESD.
“Domestic sales counterbalanced the decline in [white goods] exports… companies managed to keep production running and hold on to their workforce thanks to local sales,” Gokhan Sigin, president of TURKBESD.
Turkish consumers spent money on white goods in the first six months of the year, anticipating that inflation would climb in the remainder of the year, Sigin added.
However, sales on the local market were expected to decline in the second half due to the weak housing market, a hike in value-added tax and limitations placed on credit cards.
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