Today, I want to review the correlation between Turkey’s export performance and export partners’ growth performance.

According to the newly revised IMF estimate, Europe, which grew by 1.6 percent in 2011, will shrink by 0.6 percent in 2012. The Eurozone is expected to contract by 0.5 percent. Earlier this week, growth figures for the fourth quarter of 2011 were announced. According to this, both the Eurozone and Europe contracted by 0.3 percent compared to quarter three. There is a close connection between the GDP growth of Turkey’s export partners and Turkey’s export performance. Of course, GDP growth is not the only determinant of the volume of exports to that particular export partner. Exchange rate and the quality of export goods are also of importance. Today, I want to review the correlation between Turkey’s export performance and export partners’ growth performance, keeping other determinants into account.  When we rank average exports to individual European countries between 2002 and 2011 in a descending order, we see Germany on the top. Over the examined period, 12 percent of Turkey’s exports were to Germany, followed by UK (7.3 percent), Italy (6.6 percent), France (5.5 percent) and USA (5.5 percent). Exports to the twelve countries on the top of the list constitute 50 percent of total exports. The ratio for twenty one countries on the top is 70 percent.

I will focus on these twenty one countries to which Turkey intensively exports. I will weigh the annual GDP growth in these countries for the 2002-2011 period on the basis of their share in Turkey’s annual exports. This way I can calculate a single GDP growth rate for each year between 2002 and 2011 for the twenty one countries that receives 70 percent of Turkey’s total exports. I will call this “the market growth rate.” Higher the share of a country in total exports in a given year, larger will be its weight in the market growth rate.

The Graph below shows the export growth rates and market growth rates for the examined period where the former is demonstrated in the left axis and the latter in the right axis. There is no one-to-one connection between the two variables; however, the graph reveals that they are closely connected. The examined period is quite short to confirm this connection. But it is not my purpose to confirm the relationship with such a simple graph. For the purposes of this commentary, I just tried to present that there is a close connection between the two variables.

What the level of market growth rate will be in 2012 is of importance. Growth estimates for seven out of twenty one have been revised, mainly downwards, during January. For others, I used the IMF estimations for September 2011. But if they were revised, the revision would most probably be downwards. As I said before, I calculated the market growth rate by multiplying GDP growth rate in a country by the share of the given country in Turkey’s exports. I used the market shares for 2011 for countries on which no later data exists.

According to this calculation, the market growth rate is expected to decrease from 2.8 percent in 2011 to 2.2 percent in 2012. Two points are important here: First, Turkey’s export market will continue growing during 2012. Second, market growth rate will slow down, though slightly. In short, in 2012 exports will not contribute to growth as much as it did in 2011. Still, it will not be a major impediment to Turkey’s growth performance. Then, the main determinant will be the international risk appetite, in terms of which things are not on track lately.

Graph 1. Growth of Turkey’s exports and GDP growth across export markets: 2002-2022 (%)

This commentary was published in Radikal daily on 08.03.2012