major macro economic indicators
|GDP growth (%)||4,2||2,9||4,0||3,8|
|Inflation (yearly average) (%)||7,5||8,9||7,7||7,7|
|Budget balance (% GDP)||-1,3||-1,5||-1,3||-1,6|
|Current account balance (% GDP)||-7,7||-5,5||-4,5||-4,9|
|Public debt (% GDP)||36,1||33,5||32,9||32,0|
- Healthy public finances
- Demographic vitality and qualified labour force
- Key regional position
- Market with 75 million inhabitants and rising middle class
- Healthy and robust banking sector since the 2002 reforms
- Substantial current account deficit and insufficient domestic savings
- Dependence on foreign capital, notably portfolio investment
- Foreign-currency debt among companies and banks, accentuating their exposure to currency risk
- Significant share of the informal economy
- Delicate external and domestic political situation (Kurdish question, Syrian and Iraqi conflicts, coup attempt)
- Authoritarian drift of the executive
Growth likely to decrease in 2016, weakened by the fall in tourism activity
Growth is likely to decrease in 2016. Indeed, foreign tourism activity which represents almost 10% of GDP will halve. Moreover, the troubled political context both internal (conflict between the power and Kurdish rebels, terrorist attacks, attempted coup) and external (war in Syria and in Iraq) will continue to weigh on internal and external demand. However, household consumption would remain the main driver, supported by rising wages (minimum wage increased by 30% on January 1st) and employment, as well as several measures aimed at encouraging credit and partially compensate for the loss of tourism revenues. Private investment already affected by the less favourable financial situation for companies which, particularly in the manufacturing sector, have seen the cost of their imported inputs and debt service increase due to the depreciation of the lira, could suffer from degraded context,. External trade should contribute negatively to growth, owing to the lasting impact of Russian sanctions on exports and the disaffection of foreign tourists.
Inflation will probably remain high in 2016, well above the central bank’s 5% target, mainly as a result of rising food prices fostered by the weakening of the currency, bottlenecks in agriculture and the lack of competition in retailing. The central bank could be constrained to end the downward cycle in rates in order to not weaken the lira and promote imported inflation. In the case of new deterioration in the political situation, the central bank might even tighten its policy.
Solid public finances, but still fragile external accounts
The weight of public debt should remain low and the fiscal deficit modest despite subsidized air transport to bolster tourist arrivals, increased public payroll in tourist regions in order to reduce unemployment, and monthly allowance of 100 lira disbursed to companies for each wage under 2250 lira to partly offset the increase of the minimum wage. The payment of 3 billion euro scheduled in the agreement reached with the EU for refugee management, if held, would slightly offset expenses incurred.
Despite two years of decline the current account deficit remains high. It might rise again. The increase in sales on the European market, driven by the lira depreciation, and the reduction in the energy bill could be largely offset by the Russian sanctions lasting impact on food sales and construction contracts (sanctions adopted following the destruction of a Russian military jet by Turkish artillery on November 2015, but officially lifted in August 2016), as well as the free fall in the number of foreign visitors. Managing this current deficit will remain a major challenge: due to the weakness of FDI and the lack of domestic savings, the country depends on foreign portfolio investment whose volatility is potentially increased by the deterioration of the political situation. The currency is especially high 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.
Strengthening of the President in a difficult regional environment
Ironically, the attempted coup of July 15th 2016 could strengthen, at least in the short term, President Recep Erdoğan’s position. He ordered massive opponents arrests, thousands of soldiers, magistrates, journalists and teachers suspected of involvement in the coup and/or connivance with Fethullah Gülen, who is himself charged with the instigation of the coup. The state of emergency was declared for 3 months from the 27th of July, allowing the president to govern through decrees which, after being approved by the Parliament dominated by the Islamic-conservative party of the president (AKP), will be exempted from the Constitutional Court control. Nevertheless, the political polarisation of the society, the Kurdish question and the Syrian conflict spillovers onto the national stage (terrorism, refugees) remain major issues, while the army is weakened.
Despite signs of brightening (normalisation of relations with Israel, reconciliation with Russia and Egypt, lifting of international sanctions against Iran), the Turkish foreign policy will remain complicated. There is the concern to curb the strengthening of the Kurds in Syria, supported by Western countries in their fight against ISIS, while Turkey is also combating ISIS, and to maintain its NATO member obligations despite the recent deterioration of relations with the United-States and the European Union about Syria and the rule of law.
Last update : September 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.