Company closings tell about slowing economy

ISTANBUL

This photo shows a high-end shopping center in central Istanbul. Some 46,308 new companies were opened in the first 11 months of 2011, figures show. Hürriyet photo

There has been a dramatic spike in the number of local firms closing their doors in Turkey over the past month, according to statistics released Dec. 23 by the Turkish Union of Chambers and Commodities Exchanges (TOBB).

These findings could refute rose-tinted growth and industrial production data released earlier this month.

At the same time, the number of new firms being established also dropped sharply, adding fuel to the findings above. According to the TOBB data, there was an almost 19 percent decrease in the number of new firms established between October and November. The total number of new firms in the first 11 months of 2011 was 46,308, while there were 4,413 firms set up in October. This number dropped to 3,603 in November. Likewise, the number of company closings witnessed a 22 percent increase from October.

When looking at an 11 month timeline, however, the total number of new firms has seen a 7.5 percent increase, further highlighting the significance of the sharp drop over the last month.

A graph of new company openings provided by TOBB depicts there was a steady decline since the peak between May and June, a rise again in October and then another sharp decline.

The only time there was a similar phenomenon, with a spike in company openings followed by a steady decline, was right before the 2008 economic crisis in Turkey.

Other data showing company closings is even more dramatic. After a very large spike in April and then again in July, there was a sharp fall in August, followed by a slight rise in October and then another sharp fall in November.

The research on company openings and closings points to a similar trend, which could be a harbinger for what is looming for the economy as a whole in 2012. The government’s revised growth expectation for 2011 is 7.5 percent. For 2012, the government expects 4.5 percent growth, but the International Monetary Fund estimates a much lower growth rate at 2 percent.