The Turkish lira hit new lows on Thursday as Turkey continues to face economic uncertainty with the lira continuing to fall and inflation rising.
With a continued lack of foreign investment and tourism levels down due to the COVID-19 pandemic, Turkish citizens are feeling the pain of the economic turmoil that threatens the country. In just two weeks, the lira went from around 6.80 to $1 at its lowest point to over 7.20 in the first week of August.
Ismail Berker Beysel, an undergraduate student and an IT analyst intern, has noticed the rise in prices lately. While the extent of the increase varies from product to product, he noted that there was a large increase overall.
“I had to make some adjustments to my shopping routines,” he told Al Arabiya English. “But nothing too major. I canceled some of my online subscriptions because of increasing foreign currencies. Also, I focused on investments and savings to plan ahead.”
Despite not having to make massive adjustments to his life, Beysel is looking for potential job opportunities abroad following his graduation in the event that the economic situation continues to worsen.
“I try to follow the news and I can see that the situation is getting worse,” he explained. “That’s why I focus on planning for the future. I’m searching for [potential] job opportunities in other countries.”
Even though he is looking at opportunities abroad, Beysel does not plan on leaving the country unless he absolutely has to. Fatih Pishkin also does not plan on leaving a country that he deeply loves.
Pishkin is a student who will sometimes work at his family’s coffee shop at a mall. While working there lately, he has noticed a significant decrease in foot traffic.
“The mall is maybe 10 percent full,” Pishkin told Al Arabiya English. “Before it was 80 percent.”
While much of this is due to fears surrounding the spread of the coronavirus, Pishkin argues that the economic situation has been a contributing factor as well.
According to economist Mustafa Sonmez, this economic turmoil first began in 2018 where signs of trouble began to show with economic growth being less than what Sonmez believed was within Turkey’s potential.
Then the pandemic struck, and tourism – one of the largest contributors to the Turkish economy – dried up.
“They [the government] don’t have enough currency in the central bank,” Sonmez told Al-Arabiya English, “because Turkey’s exports and tourism decreased especially in the pandemic.”
According to the economist, the lack of currency in the central bank is a contributing factor that has discouraged investors from coming to Turkey as they may not be able to make their money back much less a profit.
Hagia Sophia, a UNESCO World Heritage Site, is seen in Istanbul, Turkey, June 28, 2020. (Reuters)
“That’s why new foreign currencies are not coming,” he said, “Investors are not sure that they can come to Turkey and make investments. That’s the problem with a shortage of foreign exchange.”
Now, because the prices for foreign exchange are increasing, inflation is increasing with imported products seeing the largest rise in price.
“If the foreign exchange price is up,” Sonmez explained, “it causes the prices [to increase] of anything imported or energy, any consumer good that’s imported or other imported goods. It causes a high inflation.”
In addition to this, the vast majority of people’s salaries are below the inflation rate, therefore decreasing their spending power and how much money they are able to put back into the economy.
“The consumer prices are increasing because most of the goods are imported,” Sonmez stated. “Both intermediate goods and any others are imported. So, when the Turkish lira decreases in value, it comes to the consumer as inflation.”
Sonmez argues that Turkey needs to give “trust to domestic and foreign actors” so that they would invest in the Turkish economy and, therefore, create more foreign exchange, decreasing prices along with inflation. With inflation down, average Turkish citizens would be able to put their money back into the economy.
However, many Turkish citizens are not optimistic about the future. Pishkin said that he is not worried about the situation getting worse, because he is certain that it will continue to deteriorate no matter what happens.
Only getting worse
“I’m not worried,” he said. “It will be worse anyways. Turkey’s economy was already in shambles. Corona[virus] only sped up the process.”
With the situation continuing to worsen, Pishkin is worried that it will devolve to the level of a country in the midst of a civil war.
“Soon we will be like Syria and Libya,” he stated. “And we’ll just have to do whatever it takes to survive.”
Despite this fear, Central Bank Governor Murat Uysal remains confident that despite the shortcomings of the first half of the year, the second one will be significantly better even if there is a second wave of coronavirus in Turkey.
“Even if uncertainties regarding the global economy are taken into account,” the governor stated during a presentation on the central bank’s third annual inflation report in Ankara, “the second wave will not restrict economic activities as compared with the first.”
Despite his optimism, COVID-19 cases continue to rise in Turkey and tourism numbers remain low.
Still, no matter the future, most Turkish citizens plan on remaining in their home country. Beysel is among this group of people unless he is offered an opportunity abroad that he could not pass up.
“I like my country and I’m settled here,” he explained, “that’s why in my near future plans I don’t see myself leaving the country. But if there is a good opportunity, it isn’t the end of the world to start living in another country.”SHOW MORE