Boston, MA -- (SBWIRE) -- 07/14/2012 -- BMI View: Despite macro concerns and waning confidence in the Turkish economy - prompting a downward revision to our forecasts in February 2012 - we still expect healthy growth of 5.8% in 2012's construction industry value. Rising government budget deficit, increasing cost of credit and structural flaws in the domestic banking and pension sectors pose significant downward risks; however, we remain optimistic about the industry's growth potential, thanks to a slew of ongoing high-profile projects in the country. The most notable of these are: the Sino-Turkish 'strategic partnership' high-speed rail project; the Izmit Bay Crossing and the Izmir-Istanbul highway; the Trans-Anatolian gas pipeline; and various major power plant projects around the country.
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We have long held a positive growth outlook for Turkey's construction sector, prompted by a combination of government commitment, an open business environment (Turkey scores highly in BMI's Infrastructure risk/rewards rating) and a flurry of major projects in the pipeline (most notably the Izmit Bay Crossing, the Izmir-Istanbul highway and the Trans-Anatolian gas pipeline).
However, there are mounting risks to Turkey's construction sector outlook, which come in the form of: the European debt crisis, structural flaws in the domestic pension and banking sectors, erratic monetary policy and the rising cost of credit. Together, these factors impelled a marginal downward revision to our sector forecasts in February 2012. Average real growth for the period 2012-16 is forecast to come in at 4.9%, down from our previous figure of 6%
We believe there will be sustained growth in Turkey's construction sector over our forecast period; however, due to the country's history of high volatility and abrupt trends, in addition to the potentially far-reaching repercussions for the Turkish economy if there were to be a contraction in the construction sector, we are keeping a careful eye on the forecast.
From 2012 onwards, our core forecast scenario sees Turkey's infrastructure sector gradually becoming the main contributor to overall construction industry value. If this plays out, it will take the place of the residential and non-residential building sector, which currently dominates.
Other key predictions include:
- We expect the transport infrastructure segment to drive the country's infrastructure growth from 2012 onwards. The rail sub-sector will do most of the work and is due to receive a boost from a Chinese loan to fund the construction of high-speed train lines spanning 7000km between Edrine and Kars. The construction of the Izmit Bay Crossing-Gebze-Izmir motorway and the ongoing work on the Marmaray tunnel beneath the Bosphorous strait are other key projects promoting growth in the transport sector, which we expect to average just below 10% year-on-year between 2012 and 2016.
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