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.
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.