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Turkish Currency in Freefall, Turkish Citizens Admit to Eating Less

Another farmer, Feride Tufan, claimed the only way to survive was to sell his assets
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Turkish Currency in Freefall, Turkish Citizens Admit to Eating Less
Gratisun - Turkey's national currency, the lira, has slumped to 45% against the dollar this year but President Recep Tayyip Erdogan has so far appeared unperturbed.

The lira's decline hit rock bottom this week, but Turkey's long-ruling leader maintained his approach of an "independent economic war" with low interest rates.

Then why does President Erdogan maintain the model, which critics say risks rising inflation, unemployment and poverty levels, and what does it mean for Turks?


Unusual policy

The simple reason for the lira's slump is Erdogan's unusual economic policy of keeping interest rates low to boost Turkey's economic growth and export potential at competitive exchange rates.

For many economists, if inflation rises all it does to control it is to raise interest rates. But President Erdogan views interest rates as "a ugliness of the world."

"Everything is expensive," Sevim Yildirim told the BBC at a fruit market. "At this price, it's impossible to provide the main meal for the family."

Annual inflation rose above 21% in Turkey, but the Central Bank of the Republic of Turkey, controlled by Erdogan, only lowered interest rates from 16% to 15%, the third cut this year.

Inflation is rising around the world, and central banks in each country are talking about raising interest rates. Not so in Turkey, as President Erdogan believes inflation will eventually fall.

Within two years he had sacked three central bank presidents and only this week he replaced the finance minister. So the lira exchange rate continues to decline.


Prices skyrocket

Turkey's economy depends on imports to produce goods ranging from food to textiles so the rising value of the dollar has a direct impact on the price of essential goods.

For example tomatoes, an important ingredient in Turkish cuisine. To grow tomatoes, farmers need gas and fertilizer that must be imported.

Tomato prices rose by 75% in August compared with prices a year earlier, according to the Chamber of Commerce in Antalya, an agricultural hub in the southern coast.

"How can we profit in these conditions?" asked Sadiye Kaleci, who grows pamukova grapes, a small town about three hours' drive from Istanbul.

"We sell at a low price, the purchase price is expensive," complained the woman. For his vines, he needs to buy diesel, fertilizer and sulfur.

Another farmer, Feride Tufan, claimed the only way to survive was to sell his assets: "We pay off debts by selling our land and vineyards. But if we sell everything, we have nothing left."

The lira currency is so volatile that prices change every day.

"I've cut back on all expenses," Hakan Ayran said while shopping at the market. "To cover everyone's needs cut down on eating and nobody to shop."

Supermarket employees posted price increases on social media, showing previous prices and current prices.

The items vary like margarine (above) and olive oil, tea, coffee, laundry soap and toilet paper.

A bakery in Turkey's third-largest city, Izmir, posted an announcement to explain the price increase by listing the price increases of necessary ingredients such as flour, oil and sesame. The announcement concluded with the words: "May the Lord be with us."

Foreign currency is a problem for the private sector and most companies hold their products in warehouses because they are more profitable than selling them, due to lira votality and inflation.

All this increases poverty and widens the income gap and the wealth gap.


Young people are angry.

Queues took place at public refueling stations and government offices offering bread at asking prices.

At the same time, opposition parties are urging expedited elections. When the lira slumped 18% within a day on November 23, there were protests and dozens of citizens were arrested.

But the most observable expressions of anger among Turkey's younger generation were conveyed via Twitter, live streaming on Twitch, TikTok videos and YouTube.

"I'm not happy with the government at all. I can't imagine a future for myself in this country," one young man told reporters on one of the YouTube channels.

One in five young people in Turkey is unemployed; Even the number of unemployed women is even greater.

Turkey is the fourth highest country in the world in terms of the number of young people who are not working, not attending school or getting training, according to the OECD.

This group of young people compared their standard of living with the standard of living in other countries.

"For young people in the United States or Europe, they could easily buy an iPhone with their paycheck," an 18-year-old said. Even if I work for months, I can't afford it. It doesn't deserve to happen to me."

The younger generation is poised to play an important role in Turkish politics, which has been ruled by Erdogan's Justice and Development Party (AKP) since 2002.

Nearly nine million Turks born after the late 1990s will have the right to vote in 2023 and that could spell trouble for the AKP.


'It's impossible to guess.'

The success of the ruling party was supported by foreign funds after the 2008 financial crisis.

But much of the economic growth has been driven by government spending and loans that are more geared toward the construction industry.

As a result, production remains dependent on imports and the economy is swayed by currency fluctuations.

Not many people believe Erdogan's economic model will help the Turkish lira.

Amid the uncertainty, economist Arda Tunca said it was unpredictable what would happen in the future.

"This is the first time we have implemented a model that is completely beyond economic theory. When there was a crisis before we were able to guess what was going to happen. Now it's impossible," he said.

PT Saifullah Digital Advantec