Contents

“Global machinery and equipment investments lag behind 2022”
“The exit from green funds is a signal flare of polarisation”
“A contracted market multiplies the striking power of imports”

According to consolidated machinery manufacturing industry data shared by the Machinery Exporters’ Association (MAİB), Türkiye’s total machinery exports, including free zones, rose by 0.3 per cent to 28.3 billion dollars in 2024, setting a record. While exports to Germany, the sector’s largest export market, fell by 5.4%, the US market, where machinery exports increased by 5.6% to reach 1.8 billion dollars, closed this gap.

According to consolidated machinery manufacturing industry data, Türkiye’s total machinery exports, including free zones, amounted to 28.3 billion dollars in 2024, an increase of 0.3 per cent on the previous year. While machinery manufacturers’ exports fell by 4.7 per cent in tonnage, their average export prices per kg rose by 4.2 per cent. The most exported sub-sectors were domestic and industrial refrigeration machinery and internal combustion engines and parts, followed by construction and mining machinery and washing and drying machines respectively. The sub-sector with the highest proportional increase in exports was turbines, turbojets and hydraulic cylinders, while the largest decline was seen in electric motors and generators. Exports to Germany, the largest export market, fell by 5.4 per cent to 3 billion dollars, while the gap there was closed by the US market, where machinery exports rose by 5.6 per cent to 1.8 billion dollars. Although machinery exports to Russia fell by 400 million dollars due to sanctions, the sector achieved a total of 100 million dollars more in exports than in the previous year.

“Global machinery and equipment investments lag behind 2022”

Sharing his expectations for global machinery trade and Türkiye’s exports, with the forecast that this will be a year in which macro-policy proposals come to the fore against the climate of uncertainty inherited from the past, Kutlu Karavelioğlu, Chairman of the Machinery Exporters’ Association, said: “Global machinery and equipment exports, which contracted by 1 per cent the year before, closed 2024 with a 2 per cent increase driven by rising machinery prices and a limited recovery. The IMF’s forecast that the world economy will grow by around 2.8 per cent in 2025, remaining below its potential, indicates that machinery and equipment investments will not rise to the 2022 level of 5.5 trillion dollars this year either, and that production losses will not be recouped. Considerable sources are also voicing the view that additional customs duties Trump may impose to fulfil his election promises could shrink global trade by 8-10 per cent. The result of a wave of protectionism that could spread across the entire world would be investments remaining at a low level owing to renewed inflation and a high interest rate environment. Critical days lie ahead for our sector, which in 2024 overcame the difficulties in Europe thanks to the vibrancy in the US.”

“The exit from green funds is a signal flare of polarisation”

Stating that they expect the contraction to continue in Europe, where, according to the ORGALIM report, real investments fell by 3.9 per cent and the machinery sector closed the year with a 4.8 per cent drop in turnover, Karavelioğlu said: “In Germany, which is losing competitiveness in the industrial sectors where it has traditionally been strong and, owing to the deterioration of its production infrastructure, has begun to lose its skilled workforce to the service sectors, the process described as ‘deindustrialisation’ is having many social side effects. In Europe, where political uncertainties have been added to rising concerns, while the situation in relatively smaller economies may be manageable, confidence in the German economy is being shaken. Europe, where SMEs are slowly withdrawing from manufacturing and large-scale manufacturers have fallen behind technologically, is looking for ways both to overcome the stagnation in its domestic market and to create export advantages through new FTAs. It is becoming increasingly difficult for them to cope with the strategic moves of China, which has put every kind of aggressive measure, including devaluation, on its agenda against Trump’s policies and aims to raise the share of industry in GNP back to 35 per cent. At precisely this stage, the withdrawal of US banks one by one from global green funds can be read as a new manifestation of the increasingly tangible EU-US polarisation. The EU is running into difficulties with the Green Deal, which it has clung to tightly to preserve its competitiveness but which has drawn a reaction from its own industry at every stage. We consider the question of which countries will be able to cope with the brand-new risks that a Europe forced to turn inward, and even to close itself off, will create for world trade and production to be important in determining our strategies. Despite all the current uncertainties, we must not leave unfinished any process or investment we have undertaken to increase our richness in technology and quality classes.”

Pointing out that possible developments such as the reconstruction of Syria, Ukraine and Palestine with the support of international financial programmes, and the reopening of the restricted Russian and Israeli markets, are creating strong expectations for 2025 and beyond, Karavelioğlu said: “It is clear that the eagerly awaited ceasefire or peace agreements, which are hoped to end all sanctions, will take time. Our loss of revenue in Russia, where our exports contracted by 17.1 per cent this year, reached 400 million dollars. The trade ban with Israel also had a negative impact of around 250 million dollars on our machinery exports. When we take into account the efforts of Europe, whose NATO guarantee is diminishing, to increase its defence industry capacity, new opportunities appear to be emerging on the horizon in which, despite everything, we will be able to test our competitiveness, which has grown considerably stronger since the pandemic.”

“A contracted market multiplies the striking power of imports”

Noting that the manufacturing PMI for the machinery sector has been in negative territory for the last 4 months and that, according to TurkStat, production in the machinery industry fell by 8.3 per cent in the January-October period, Karavelioğlu said they are more optimistic about 2025: “Although commercial loan growth is still running below targets, we understand that there will be an easing depending on the course of inflation, and that efforts will be made to relieve small and medium-sized enterprises through measures such as the Employment Protection Programme and new financing opportunities. Positive news such as the reduction in interest costs on rediscount loans for exports and foreign exchange-earning services is erasing the traces of the pessimism of the last quarter of 2024. Nevertheless, at a time when the deterioration in manufacturing activity and the slowdown in the global machinery order index continue, it will certainly not be easy to turn positive machinery and equipment investments, which began to contract last year after a gap of 19 quarters.”

Stating that consumption rather than production was the main factor behind inflation outturns exceeding targets in 2024, Karavelioğlu noted the following: “We have left behind a year in which the cost pressure created by the strong Turkish lira policy on engineering-intensive sectors with a high share of domestic added value, such as machinery, eroded competitiveness. Learning that the lira will continue to appreciate in the new year may have pleased importers, whose striking power is multiplied in a shrinking market. In addition, as a sector that makes 47 per cent of its exports in euros, changes in the parity may also pull our exports down in dollar terms. In a process where hot wars are giving way to trade wars, the moves of Trump, who gives ample room to business people in his management team, may be inspiring. We believe we will not be left defenceless in the new year, in which the DXY index is expected to develop in favour of the dollar and imports are set to become increasingly easier.”