European countries have this year been scrambling to tame inflation,
driven by the aftershocks of COVID and the war in Ukraine. Yet while
surging prices on the scale seen recently in the West have been a
relatively rare sight over the past decade, the same is not true of Turkey.
However, local resilience to a worsening economic picture has proven
remarkable, with IT revenue sales through distribution comfortably
outstripping those across Europe over recent weeks. Unfortunately,
tougher conditions have prevailed across some of the larger markets in
the Middle East and North Africa.
Turkey remains resilient
The economic picture in Turkey is deteriorating even further than
in Europe-with inflation officially standing at 83%, although
unofficially it may be as high as 190%. These record figures are due
in part to the highly unorthodox policy promoted by President Erdogan.
Despite evidence to the contrary, he continues to maintain that
raising interest rates increases rather than helps to stifle
inflation. Thus, while western central banks raise rates to dampen
consumer and business spending, their Turkish equivalent recently
reduced the headline policy rate to 10.5%.
This continues to weaken the lira, which fell to an all-time low of
18.6 against the dollar recently.
Yet despite this gloomy outlook, the IT channel is performing well.
According to CONTEXT's Revenue Trend Index, sales have risen and in
the past three weeks remained 20-30% above the index baseline, which
represents the 2021 weekly average. That is calculating sales with a
daily dollar exchange rate. By comparison, European figures have
remained under the 2021 baseline for the past 12 weeks.
Exceeding expectations
There are several reasons for this healthy performance. Turkish
distributors and vendors are used to dealing with a tough economic
climate, and have the right skills to manage crises like this. They
have also been helped by an influx of Russian money into the country
seeking to evade western sanctions.
Business channels have outperformed those in Europe during Q3 2022
due to the completion of many public and private sector projects
driven by the reopening of offices and schools. Desktop computers,
servers, displays and networking systems have all seen impressive
year-on-year performance as a result. On the consumer side,
higher-than-forecast sales of the iPhone 14 helped buoy revenue,
especially through consumer e-tailers.
The channel can also look forward to a likely influx of government
cash soon as the current administration looks to spend heavily ahead
of elections in June 2023, in a bid to hold onto power.
A mixed picture in MEA
The picture hasn't been quite so rosy in the Middle East and
Africa (MEA). There have been tough market conditions in countries
like Egypt and Saudi Arabia. In the former, the introduction of a
"letter of credit" as a mandatory prior condition for
imports has added delays and costs for importers of IT equipment, as
well as limiting shipment volumes. In Saudi Arabia, there's been
softer demand in ICT as more investment is directed towards the
hospitality and entertainment sectors.
Across the smaller Gulf states, the region has seen plenty of recent
growth in ICT, but there is uncertainty about the coming year. Vendors
are worried about Qatar's post-World Cup prospects, especially as the
tournament is likely to highlight concerns over human rights abuses in
the country. However, the UAE remains a thriving hub for the rest of
the region, with recent investment from both Russia and Ukraine
helping to drive continued success.
CONTEXT is expanding its presence in this region, so watch out for
more regular updates coming soon.
