Turkish economy in free fall. The effects on road freight and trade
Earlier this week the Turkish lira plunged by 18% against the dollar in one day as Turkey’s economy goes into free fall. This dramatic decrease in value was the largest fall since the financial crisis of 2001. What caused it, the deepening rifts between with the United States, worries about its own economy and lack of action from the Turkish policy makers. The lira has fallen more than 40 percent this year highlighting the long term crisis the country faces.
The IMF’s latest forecasts for Turkey make grim reading compared with their forecast of April 2018. By the end of this year inflation will be almost double their forecast at 20%, Unemployment is expected to hit 11% with Public gross debt to GDP a staggering 32.3% and rising further in 2019.
The fall in the Turkish Lira and overseas trade
The fall in the Turkish Lira may be great for tourists where their dollar or pound goes a lot further but debilitating for a country already at odds with world leaders. With the US imposing sanctions on Turkey’s justice and interior ministers and a relationship which back in 2016 looking strong but quickly souring the effect on trade has been dramatic towards the end of 2018. The drop in the Turkish Lira has put the country under increasing pressure and one of the major areas to see this is in the way Turkey handles their exports into Europe and in particular the UK.
Turkish exports by road.
With exports from Turkey coming out of the country and the Turkish Lira making their exports cheaper you would imagine that exports would enjoy a boom time and all modes of transport would see an increase in the volume of goods. This isn’t the effect though that the freight industry is seeing.
With imports becoming so expensive what you are actually seeing appears to be road freight vehicles struggling for back loads with hauliers looking to massively increase rates on the export leg to cover the fact that the trucks are returning empty. We have seen reports of rates doubling for exports out of Turkey to the UK with trucks being offered at a rate and then in a matter of hours being told the truck has been sold elsewhere at a much higher rate, there is an excellent article here from one of the leading forwarders, John Good Shipping, on the trade between Turkey and the UK.
As consignee’s across all modes of transport look for cheaper and cheaper rates with stability the road freight ex Turkey at the moment is seeing rates forced up due to market forces with a huge imbalance in two-way trade.
With Customers moving from road freight to sea freight will the Turkish haulage market recover.
With March 2019 fast approaching, nobody knows what “BREXIT” will bring for goods travelling from outside the European Union across several countries and into the UK. The road freight market from Turkey can ill afford to lose even more ground to sea freight consolidators like “John Good” at this crucial juncture so close to “Brexit”. As both shippers and consignees begin to see the benefits of knowing a regular departure time. Safety of their goods in transit with little or no damage. No delays from migrants entering the UK in Turkish trucks. Rates which stay pretty much static all year round as short-sea shipping line rates remain constant. Road freight may become the big loser.
By the time sanctions are eased and the Turkish Lira begins to recover it may already be to late for an industry which relies on flowing free-trade between the UK and Turkey to hold rates that compete with LCL & FCL services. With urgent consignments moving by air and daily flights into multiple airports across the UK Turkish hauliers may feel the excessive burdens of whatever T1 type system Europe imposes to get cargo to the UK, they may be better letting the UK market shrink for richer pickings throughout Europe.
2018 and the impact of the falling Lira could see a wholesale switch from customers in the UK as to how they purchase their transport needs from Turkey.
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