Toygar Narbay, President of the Turkish Clothing Manufacturers’ Association (TGSD), issued a press statement to draw attention to the critical situation of the Turkish apparel industry, which closed the first four months of this year with a loss after 2023 and 2024, and to share urgent solution proposals. Evaluating the situation of the sector and the effects of the current economic policies on it, he reminded the 10-item urgent support proposals they announced in the past months and emphasized the importance of the first 3 items in particular.
Narbay said that the interest rate policy has created an inflationary effect and that if the current conditions continue, many companies will use up their own resources by the end of the year, and pointed out that as a result of the lost competitiveness, the inevitable end will be confronted with concordat and bankruptcies along with customer and employment losses.
“State support is no longer a choice, but a necessity”
He stated that the Turkish apparel industry, together with the textile industry, is one of the locomotive sectors of Türkiye and contributes to the country’s economy with 1 million jobs and 50 billion dollars of production. “However, the recent economic fluctuations and the policies implemented have brought our industry to an unsustainable point. It does not seem possible for us to get out of this crisis, which we did not cause, on our own. For this reason, state support is no longer a choice, but a necessity,” he said.
Narbay summarized the situation of the sector in figures as follows: “While the official inflation rate for the period 2022-2024 was announced as 138%, the minimum wage increased by 249% and the policy interest rate by 258% in the same period. The striking difference between these figures indicates that price pressures in the economy are deeper and more widespread than official inflation suggests. Moreover, despite the high increase in the minimum wage, there is no significant improvement in the purchasing power of employees. This situation reveals the incompatibility between the announced data and daily life.”
“Turkish apparel products are 60% more expensive than Far East and 45% more expensive than North African countries”
“In a period when our costs increased by at least 249%, the increase in the exchange rate, which directly affects our revenues, remained at the level of only 101%, seriously distorting the income-expense balance to the detriment of the sector,” Toygar Narbay said, underlining that this gap is too deep to be compensated by investments in efficiency, innovation and branding in production processes: “Even when official inflation figures are taken as a basis, it is seen that our sector bears an additional cost of 27% in dollar terms. This situation has seriously weakened our competitiveness in international markets. So much so that today Turkish apparel products are 60% more expensive than in the Far East and 45% more expensive than in North African countries.”
“We think that current policies are preventing a permanent reduction in inflation”
Referring to the effects of the interest rate policy on the sector, Narbay said, “The current economic policy is aimed at controlling inflation by suppressing the increase in exchange rates. However, the fact that inflation was 44% last year despite a 16% increase in the currency basket raises questions about the effectiveness of this policy. Moreover, high interest rates are reflected in credit and installment sales, pushing up product prices. For example, for a product sold with a six-month maturity, the commercial interest cost reaches 60%, forcing the producer to put an additional interest burden of over 30% on the price. This triggers a direct pass-through of interest rate-driven price increases to inflation.”
On the other hand, interest is an important component of forward exchange rate calculations used by importers. This pricing method, which is formed by multiplying the exchange rate and interest, is reflected in product prices. This is the main reason why a product that costs 10 euros in Europe is sold for 14-15 euros in Türkiye.
In addition, while inflation after one year is targeted at 25%, the 46% interest rate also creates an inflationary effect due to monetary expansion.
For all these reasons, we believe that the current policies, which erode the competitiveness and capital structure of exporters, prevent a permanent reduction in inflation. It is obvious that there is a need for a new evaluation process that considers the economic balance and puts production and exports at the center.
“An urgent support package should be prepared”
Toygar Narbay stated that “An urgent support package should be prepared for the apparel industry, which has lost its competitiveness and equity capital” and underlined that 3 articles of the 10-item support proposal that TGSD shared with the public in the past months are of critical importance at this stage. “As the Turkish Clothing Manufacturers’ Association, we are ready to develop constructive collaborations with the public, finance and all relevant stakeholders and to assume our responsibilities in this process in order to protect the future of our industry and to continue to contribute to the sustainable development of our country,” he said.