Turkish constructors heading for trouble – analysis

Turkey’s construction industry may be heading for troubled times as company debts pile up and many firms shut down, Melih Yeşilbağ said in an editorial for Turkish news website Sol.

The number of company closures in the sector more than doubled last year to 2,510 and totaled 427 in January this year alone, Yeşilbağ said. The share of bad debts in the industry as a proportion of total private sector debt has climbed from 4.4 percent in 2005 to 14.9 percent in 2016, he said, citing central bank data.

Construction of new residential buildings, road, highways and dams has helped drive economic growth in Turkey under the government of President Recep Tayyip Erdoğan.

But sales of homes slumped 10 percent in the final quarter of 2017 compared with a year previously, Yeşilbağ said. Meanwhile the number of planning permission approvals surged to 1.1 million in the first nine months of last year compared with 998,000 in the whole of 2016, he said.

The construction industry’s contribution to the economy has climbed to 9.7 percent in 2016 from 5.1 percent in 2002, when Erdoğan’s government came to power. The figure compares with 5.3 percent for the European Union and with rates seen in Ireland, Spain and Greece just prior to the financial crisis, which exposed these countries’ reliance on the industry, Yeşilbağ said.