IDMIB/Karaca: The Leather Industry Can Break Records Again as Production and Investment Environment Improves

The leather and leather goods sector achieved an export of 1.52 billion dollars in 2024. Güven Karaca, Chairman of the Istanbul Leather and Leather Goods Exporters' Association (İDMİB), stated that with an export value of 11.8 dollars per kilogram, they are the fourth most valuable sector in Turkey. He mentioned that when the economic policies and disinflation process in Turkey are completed and the production and investment environment improves, the sector could break records again. Karaca said, “While the current struggle has created a cooling effect in the industry, the expected cooling in consumption has not been observed. Unfortunately, the demand for consumer products specific to our sector has been met through imports. During this period, while the dollar appreciated by 20% against the Turkish Lira from the beginning of the year to the end, inflation reached 44%. This caused us to remain more expensive than our competitors in Asia and even in European countries, reducing our competitiveness. However, if the disinflation process becomes permanent and interest rates decrease, it could bring the sector back to a strong momentum. We will continue to be on the road to increase our share in the world.”

In 2024, the leather and leather goods sector, which achieved 1.52 billion dollars in exports compared to 2023, held a meeting hosted by Güven Karaca, with the participation of Erkan Zandar, President of the Aegean Leather and Leather Goods Exporters' Association, Berke İçten, President of the Turkish Footwear Industrialists Association (TASD), Hasan Süren, President of the Leather Goods Industrialists Association (SSD), Burak Uyguner, President of the Turkish Leather Industrialists Association (TDSD) and Vice Chairman of İDMİB, Cengiz Sarıgül, President of the Turkish Leather Garment Manufacturers Association (TDKD), Ali Yavuz Boynukısa, President of the Organic Clothing Industrialists Association (OGSD), and Sait Salıcı, President of the Footwear Sub-Industry Association (AYSAD).

‘WE ARE SHAPING THE FUTURE OF THE SECTOR’ During the meeting, Güven Karaca, who evaluated the year 2024 and made statements about future targets, noted that all civil society organizations and administrations representing the sector reached a consensus on a medium-term master plan covering the next 10 years by gathering around a single table. Güven Karaca stated, “We cannot shape the future with the conditions and realities of the day. However, while fighting the current issues, we are also working to shape the future.”

‘WE BECAME THE FOURTH MOST VALUABLE SECTOR’ Noting that Turkey achieved 261.9 billion dollars in exports in 2024, marking a 2.5% increase compared to 2023, with an average export value of 1.58 dollars per kilogram, Güven Karaca stated, “In the export performance of 2024, half of the 26 sectors closed the year with positive exports, while the other half closed with negative exports. The leather and leather goods sector, which faced high inflation and interest rates in our target markets that changed consumption habits and contracted our markets, recorded 1.52 billion dollars in exports, a decline of 17.9% in a challenging 2024. The export unit price per kilogram for the sector was recorded as 11.82 dollars, compared to 11.35 dollars in 2023. After the jewelry, defense and aerospace industries, and the ready-to-wear and apparel sectors, we became the fourth most valuable sector. Although we experienced a decline in exports, we as the leather and leather goods sector continue to fully focus on value-added exports.”

THE LARGEST MARKET IS THE EUROPEAN UNION Indicating that the main market of the sector is the European Union countries with a share of 39.7%, Güven Karaca stated that the Middle Eastern countries ranked second with a share of 14.2%, the former Eastern bloc countries ranked third with 12.1%, Asian and Oceanian countries ranked fourth with a share of 7.7%, and African countries ranked fifth with a share of 7.3%. Emphasizing that the drop in the euro/dollar parity in the main market, the European Union countries, would be among the issues to be monitored in the future, Güven Karaca expressed that the capacity utilization of the sector decreased from 67.3% in 2023 to 62.1%, and the employment in the sector also fell from 68,956 to 62,789, according to data from October 2024. He noted, “In 2022, when we broke export records, the number of employed persons exceeded 80,000. Our sector closed 2021 with a foreign trade surplus of 567 million dollars and gave a surplus of 247 million dollars in 2022. However, in the following years, the balance shifted negatively. Our sector recorded a foreign trade deficit of 546 million dollars in 2023. By the end of 2024, a foreign trade deficit of over 1.1 billion dollars is expected.”

THE GAP WIDENED, WE STRUGGLED IN COMPETITION Güven Karaca noted that the sector experienced a loss of exports in foreign markets due to high production costs in 2024, and that local brands, which are Turkey's pride, opted for imports. He pointed out that the firms in the sector realized they could not be competitive, and their inability to meet sales targets led to a decrease in their production capacities. He stated that when the economic policies and disinflation process in Turkey are completed and the production and investment environment improves, the sector could break records again, and continued: “The disinflation process, conducted through monetary and tightening policies, has deeply affected the real sector and households. The current struggle has created a cooling effect in the industry, while the expected cooling in consumption has not been observed. Consequently, the gap between the CPI and PPI has widened. Unfortunately, this demand for consumption was met through imports for products specific to our sector. At the end of 2024, the PPI was 22.52, while the CPI was 44.38. During this period, the dollar appreciated by 20% against the Turkish Lira from the beginning of the year to the end, while inflation was 44%. This has made us more expensive than our competitors in Asia and even European countries, reducing our competitiveness.”

THE SECTOR PASSED THE FINANCIAL RESILIENCE TEST Emphasizing that the sector, which faced very high interest rates in 2024, passed the financial resilience test without experiencing a significant financial accident, Güven Karaca noted, “Starting with a 32% decrease in January 2024 and ending the year with an 18% decrease, we continue our recovery process. Our sector, participating in 7 national and dozens of individual fairs, will continue to be on the road to increase its share in exports. In this context, as we enter the early days of 2025, we view the protectionist measures in imports and the support to be provided for labor-intensive sectors positively. Although the economic impact is low, we believe the psychological effects will be significant. We see that the disinflation process has begun, hope that this process will be permanent, and emphasize the importance of a return to lower interest rates, thereby reducing the cost of access to financing for production and investment. We will also follow the developments in global trade after the change of administration in the US. All developments in our region and worldwide, especially concerning Ukraine, Russia, Israel, and Syria, will be on our radar.”