major macro economic indicators
|GDP growth (%)||4,2||2,9||3,4||3,6|
|Inflation (yearly average) (%)||7,5||8,9||7,4||7,7|
|Budget balance (% GDP)||-1,6||-1,5||-1,4||-1,7|
|Current account balance (% GDP)||-7,8||-5,8||-5,3||-4,9|
|Public debt (% GDP)||36,1||33,5||34,3||33,4|
- Public finances under control
- Demographic vitality and quality of the labour force
- Key regional position that strengthens the Turkish market’s attractiveness
- Insufficient domestic savings, substantial current account deficit and dependence on foreign capital
- Growing foreign-currency debt among companies and banks, accentuating the exposure to currency risk
- The Kurdish question remains a source of social and political instability
- Geopolitical stability affected by the Syrian and Iraqi conflicts
Growth likely to benefit from a relative easing of internal political tensions
Growth is likely to increase slightly in 2016, due to vigorous domestic demand, underpinned by a gradual return of confidence resulting from reduced uncertainty on the political front. The acceleration in activity will be driven by wages and employment growth. The informal sector will still play a crucial role in the economy. Investment is expected to grow moderately, still affected by a more fragile financial situation for companies, which - particularly in the manufacturing sector (which depends on imports of energy, intermediate goods and equipment) - have had to cope with the depreciation of the lira against the dollar (-20 % between January and November 2015), which has reduced their margins by increasing their production costs. External trade should contribute positively to growth, thanks to slightly less buoyant imports, competitiveness gains enabled by the past depreciation of the Turkish lira and the moderate recovery in Europe. Nevertheless, the embargo on certain products that Russia announced in November and the measures limiting tourism (Russians account for 10% of arrivals) should impact the economy negatively by around 0.7 percentage point of GDP.
Inflation will probably remain high in 2016, well above the central bank’s 5% target (in 2015 it was driven up by the rise in prices of domestic food products and by the weakening of the currency).
Downward risks persist, such as a fresh deterioration in the political situation that could generate new financial pressures. If the lira once again depreciated against the dollar in this context, or because of the hike in the US key interest rate, a monetary tightening could not be ruled out.
Moreover, the management of the 2.2 million Syrian refugees that Turkey has already received is a challenge for the country. The EU Regional Trust Fund will help the government with a number of aid programmes (in the areas of education, healthcare, child protection, drinking water, etc.) totalling €350 million that were adopted in December 2015. This is the most significant measure the EU has taken in response to the Syrian refugee crisis with a view to helping refugees in Lebanon, Turkey, Jordan and Iraq.
Solid public finances, still significant external risk
The public debt and fiscal deficit levels remain low, although they could increase temporarily due to the worsening of the security situation.
The current account deficit is expected to shrink in 2016 while remaining relatively high, thanks to less buoyant imports in volume terms, more vigorous exports in volume terms and the low oil price. Managing this deficit will undoubtedly be a major challenge: the country remains vulnerable to the volatility of foreign capital flows, which are crucial for the financing of the economy. The currency risk would revive in the event of a further depreciation of the lira, given the high level of the current account deficit and the US rate hike. This is especially important for Turkish companies as they have a high level of short-term debt in foreign currencies. The country’s foreign exchange reserves could prove to be insufficient in the event of sudden capital outflows.
Less internal political uncertainty, but a turbulent regional environment
The previous Prime Minister Tayyip Erdoğan was elected president by universal suffrage in the first round in August 2014. Yet, his Islamic-conservative party (AKP - Justice and Development Party) lost its absolute majority in the general elections in June 2015, although it remains the largest party by far, reflecting a certain weariness and concern among voters concerning the drift towards authoritarianism, the economic slowdown and the unclear attitude towards Daesh. Nevertheless, the AKP won almost 50% of the votes and the absolute majority of the seats in the early elections on 1 November 2015, which can be explained in particular by the rising internal and external insecurity. Even though the internal political horizon has become brighter, the political polarisation and the Kurdish question remain major issues.
On the external side, the tensions with the governments in Damascus and Bagdad, supported by Russia and Iran, are strained because of the Turkish support provided to the moderate Sunni rebel movements in their fight against Daesh, but also against the regimes in place and their supporters. Conversely, thanks to the management of the refugee problem, the relations with the EU, which has deteriorated in the past few years, could improve.
The business environment is deteriorating due to governance and corruption problems: the country lost four places in the World Bank’s 2016 rankingDoing Business. In particular, the difficulties in creating companies and in insolvency regulations have become more pronounced.
(Last update : January 2016 )
In the domestic market, traditional instruments for credit payment are still in common use as they not only constitute a means of payment but also can often serve as negotiable instruments.
This is the case for promissory notes in regular use for commercial transactions by smaller and medium-sized companies. Similarly, with the postdating of cheques a commonplace practice, the cheque serves as both a title of payment and a credit instrument. Cheques circulate in the domestic market as negotiable instruments until the maturity date.
The new law on cheques, in force since December 2009, focuses on protection of the rights of cheque holders (beneficiaries) and institutes three categories of cheques – cheques for business users, cheques for consumers, and pre-printed bearer cheques – to facilitate tracking this payment instrument and to combat the underground economy.
Although banks are now required to exercise greater vigilance as regard the profile of their clients, the law also provides for large financial sanctions payable by the drawer of the cheque in case of non-payment.
Likewise, according to the amendment on 3 February 2012, the drawer of a dishonoured cheque will be banned from drawing cheques and / or opening cheque accounts for 10 years, by decision of the public prosecutor (administrative sanction instead of penal sanction).
There are, as such, particular advantages deriving to creditors from the use of negotiable instruments like bills of exchange, promissory notes, and cheques – provided they have been duly established and that any legal action is taken within the legal limitation period. They enable creditors, without obtaining a prior ruling, to approach directly the enforcement office (Icra Dairesi) for service on the debtor of an injunction to pay and then, as necessary, to proceed with the seizure of the debtor’s assets.
The debtor has 10 days to settle the arrears in question or 5 days to approach the enforcement court and to oppose payment on grounds that, for example, the signature on the document is not his own or that the debt no longer exists. In case of opposition on abusive grounds, the debtor is liable to large penalties.
Finally, for rapid and secure processing of bank transfers, the SWIFT electronic network is well-established in Turkish banking circles and constitutes the most commonly used instrument for international payments.
Out of court settlement is always advisable to taking legal action, and as a result, the sending of formal notice to pay, followed up by repeated telephone calls, remains a relatively effective method. As well, on-site visits can moreover pave the way for restoring communication between the supplier and his customer and thereby enhance the chances for negotiating a transaction.
Depending on the debtor's solvency, the terms the transaction can range from payment in full to repayment by instalments, or even to a partial payment as final settlement.
In the absence of a voluntary settlement, the threat of a bankruptcy petition (iflâs) is a frequently employed tactic to elicit a response from the debtor and prompt him to repay the arrears.
In cases where the validity of the claim is disputed, the only recourse is to initiate the ordinary proceedings via a summons to appear in court.
In cases whereTurkeyhas not signed a bilateral treaty or a reciprocity treaty with the plaintiff’s country, the plaintiff will be required to put up a surety bond,judicatum solvi, representing about 15 % of the claim, with the competent local court. It's the same with a Turkish applicant who has no permanent residence inTurkey.
At the commencement of the proceedings as well, the plaintiff must also put up one quarter of the court fees, which are proportional to the amount of the claim.
The ordinary proceedings are organized in three phases: first phase involving position statements by each party (statement of claim and statement of defence); then in a second and longer phase, the court investigates the case, examining the relevance of the evidence submitted, whether conclusive or discretionary evidence ; and finally in the main hearing that constitute the third phase, the court hears the parties and their lawyers and issues a ruling.
The civil procedure code specifically states that the judge may at any time during the legal action encourage amicable settlement of the dispute, provided that it results from a real desire by the parties to seek an out-of-court settlement via a negotiated transaction.
The “LAW ON MEDIATION IN CIVIL DISPUTES” (Law No. 6325) has entered into force completely on June 22,2013. The Law stipulates that mediation shall be applied only in the resolution of private law conflicts, including those having a foreignness element, arising from acts or transactions of interested parties who have the capacity to settle such conflicts.
In this context; mediation is defined as “a method of voluntary dispute resolution system carried out with the intervention of an impartial and independent third party who is specially trained to convene the relevant parties by way of systemic techniques and with a view to help such parties mutually understand and reach a resolution through a process of communication”.
Mediation is, first of all, is a dispute resolution system. However, this resolution system is a voluntary dispute method.
Here, the parties create their own ways of solution by themselves and they try to understand each other while doing this. Mediation is based on the principle of doing meetings and negotiations and is entirely a process of communication. While the parties are creating their own ways of solution, an impartial and independent third party (a mediator) who enables the parties to establish communication, have meetings, understand each other shall be included in the process.
On the other hand, the parties are free to apply to a mediator, to continue the process, to finalize or to abandon the process.The parties may also settle on the issue of applying to a mediator before the filing a lawsuit or while the lawsuit is pending; and the court may advise, encourage the parties to apply to a mediator.
The commercial court (asliye ticaret mahkemeleri), which is a specialized chamber of the court of first instance, is competent to hear commercial disputes and insolvency proceedings. Commercial courts exist in the main Turkish cities.
To combat against lengthy lawsuits and courts workload, the new civil procedure code, effective as of 1st October 2011, aim to accelerate and simplify the proceedings.
Also, the parties have to submit their arguments of defence, their counter claims and available evidence at the commencement of the trial. These documents will be reviewed by the court during a preliminary hearing, in the course of which the parties will be encouraged to compromise.
The litigants’ examinations and cross examinations will now be conducted by lawyers to discharge the judges who had so far a great tendency to resort to expert opinions to assist them in the content of the judgment. That is why, the new code limits the list of technical and scientific experts registered with the Ministry of Justice.