Coface: Impact of Turkish political crisis on Romanian economy is limited

Newsroom 18/08/2016 | 14:33

Despite the overall effect of the Turkish political crisis on the capital market being significant, the impact on the Romanian business environment is limited, given the reduced footprint of companies with Turkish capital, a study by Coface released today shows.

“The attempted coup in Turkey, and the radical measures that preceded [it] fueled a lot of uncertainty on the capital market. In less than a week, the Turkish lira depreciated by almost 6 percent compared to the US dollar, the index of capital market in Turkey has lost 12 percent and capital investment in Turkey by non-residents fell by USD 8 billion,” Iancu Guda, CMS Services Director Coface Romania said in a press release.

“Those turbulences will be reflected on Romania only from a commercial point of view, by means of a slowdown of Romanian exports oriented towards Turkey, given that this is the main country of destination for local exports towards non-EU countries,” the statement reads.

The radical measures implemented by the Turkish government in the wake of the failed coup triggered the fall of portfolio holdings of non-resident equity investors fell by almost 20 percent in less than a week, from USD 46 billion on July 15th to EUR 38 billion on July 22. “In regard to the impact of on the business environment, it is very limited, amid the reduced footprint within the national economy of companies owned by Turkish capital,” Guda added.

Turkey has lost approximately USD 12 billion from equity investments held by non-resident investors in the past three months, the study shows. These capital outflows, the study argues, fueled pressure on the Turkish lira depreciation and the decline of the stock market. Alongside the depreciation of the Turkish lira by 6 percent compared to the US dollar, the index of the Stock Exchange of Turkey (XU100) fell by 12 percent during the period considered.

According to the COFACE study, the punitive measures implemented by the Turkish government extended to the financial sector. In practice, the consequences were the dismissal of several analysts, and the revocation of the operating licenses related to brokerage houses by the supervisory authority, after several reports that tend to stir negative expectations regarding the situation in Turkey were issued, the study argues.

EN_Coface_Turkey

“The economic uncertainty may have an indirect effect on trade relations with Romania, given that the bilateral trade between the two countries is significant,” the study reads. Turkey ranks 5th as a destination of Romanian exports and 1st among non-EU countries, respectively 11th as the country of origin of imports. After joining the EU, the study shows, Romania has maintained a positive trade balance with Turkey. Turkey ranks 5th on the list of countries Romania maintains a positive trade balance with.

In spite of the growth of bilateral trade relations, the contribution of Turkish investments on the local capital flow is “moderate,” the study argues.

Turkey ranks 18th in terms of cumulative FDI between 2008 and 2015, with a contribution of 0.5 percent. The five main investors, Austria, Germany, Italy, France and Switzerland together generated almost 72 percent of the total FDI in the period considered. According to the National Institute of Statistics (INS), considered by social capital share, Turkey ranks 14th on the list of investors in companies with foreign capital.

According to the study, the number of local companies with Turkish capital is relatively small. Data provided by the National Trade Register Register of Commerce shows that 1,007 companies registered HQ in Romania have shareholders with a registered HQ/residence in Turkey. According to financial reports submitted to the Ministry of Finance for 2015, these companies posted a total turnover of RON 4.8 billion and a total number of employees of 15.000.

Georgeta Gheorghe

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