Turkey Infrastructure Report Q2 2010

Of all the sectors that make up Turkey’s gross domestic product, the construction sector has been the
worst hit, registering a 19.5% decline in added value in real terms in the first nine months of 2009. There
has been subdued activity in the infrastructure sector as well, with major projects and privatisations put on
ice over 2009. We are optimistic for Turkey’s infrastructure sector for 2010. This is reflected in the
infrastructure industry value real growth data, where we forecast that growth in the infrastructure sector
will outpace that of the overall construction sector. Accordingly, infrastructure industry value is
forecasted to be TRY21bn (US$14.6bn) in 2010, representing an increase of 10% over 2009 in real terms.
Strong industry value growth will continue in the coming years, averaging 8.7% per annum between 2010
and 2014.
Though energy and utilities infrastructure will contribute the lion’s share to total infrastructure industry
value, transport infrastructure will see quite a steep rise, claiming a significant share of the total
infrastructure value in the coming years. Accordingly, transport infrastructure value will register annual
average real growth of 28.3% between 2010 and 2014, while energy and utilities infrastructure industry
value will register average annual real growth of 5.9% over the same period.
Both transport and energy and utilities will contribute in the value creation for the infrastructure industry,
with major projects expected to take place in both sectors. Examples include: the ongoing construction of
the high speed railways; investments in ports from the new operators; the Izmit Bay Bridge and
motorway; the Bosporus Tunnel; and, a plethora of new projects in renewable energy (including
hydropower), catalysed by newly-introduced feed-in-tariffs. The cancellation of the nuclear power tender
certainly reduced the prospects for high added value creation for the industry, however, nuclear was never
taken into account in our forecasts, so its loss does not have an impact on our predictions.
We maintain the same forecasts this quarter for the construction industry, but note that risks are to the
upside. The full-year figure for 2008 industry value came in worse than expected at TRY44.8bn; we were
forecasting TRY46bn. The real growth rate according to the statistics institute was -8.2% for 2008
(probably due to the very high raw-material prices that eroded industry real value). In BMI's ‘Q210
Turkey Infrastructure Report’ we have revised our forecasts in light of new official data that revealed a
worse picture than expected. We have revised real growth for the construction industry in 2009 to -16%
from the previous -9.4%, which indicates industry value of TRY40.5bn instead of the TRY44bn we were
expecting.
BMI's Project Finance Rating for Turkey is 42.1, which places the country at 14th place out of 16 in
Central and Eastern Europe.