Allianz Trade’s Global Insolvency Report updated last week indicates that global commercial insolvencies are expected to rise by 11% this year, and in Turkey, the outlook is particularly grave, as the report anticipates a 20% increase in insolvency rates by 2024.
Allianz Trade is an international insurance company that monitors the financial health of over 80 million companies.
The worldwide trend is linked to increased financing expenses and an economic downturn, which have notably threatened the stability of enterprises within the nation. However, Turkey has been specifically recognized as facing challenges due to high financing costs and a stagnant economy. The report forecasts an insolvency rate of 20%, cautioning that the consequences for both businesses and employees could be significant.
#TurkeyWatch??:
Today, using high-frequency data, I accurately measure Turkey’s annual inflation at 28.8%/yr.
THE TURKISH ECONOMY IS STAYING AFLOAT. pic.twitter.com/f7mgsHo8y3
— Steve Hanke (@steve_hanke) September 27, 2024
Naturally, Turkey’s sad economic state of affairs is not affected by its worsening trade relations with Israel, but it doesn’t help:
In late May, Turkey suspended all bilateral trade with Israel until the conclusion of the conflict in Gaza, a decision that contravened World Trade Organization regulations. In reaction to Turkey’s action, Israeli importers have been urgently seeking alternative suppliers for essential goods, including cement, food, and automobiles. Economists have indicated that this development is unlikely to significantly impact Israel’s $500 billion economy.
In 2022, Turkey exported $7B to Israel. The main export products to Israel were Raw Iron Bars ($757M), Cars ($353M), and Jewelry ($264M). Since 2017, Turkish exports to Israel increased at an annualized rate of 14.5%, from $3.55B in 2017 to $7B in 2022.
A significant measure of economic performance, industrial production in Turkey has experienced a downturn, leading to an increase in business bankruptcies. The enforcement of stringent monetary policies aimed at addressing elevated inflation, as directed by Treasury and Finance Minister Mehmet Simsek, has further underscored the economic deceleration.
According to the Turkish Statistical Institute (TurkStat), industrial production fell by 1.6% month-on-month in August, with a year-on-year decrease of 5.3%, representing the most substantial decline since the earthquakes of February 6, 2023. Notably, the manufacturing sector recorded a year-on-year contraction of 5.4%.
