Turkey’s economy has been shaking.
From offers of free doner kebabs to more morbid ones such as free tombstones, some Turkish businesses are keen to encourage customers to heed the president’s advice and shift their savings from US dollars to the weakening lira.
Turkish President Recep Tayyip Erdogan has been making non-stop calls since November for people to ditch the dollar in favour of the national currency, with his latest plea coming on 2 December. The lira has been setting record lows on a daily basis for weeks and is currently trading at around 3.50 to the dollar.
ONE INSTANCE OF A MERCHANT OFFERING HIS SERVICES FOR FREE TO PATRIOTS
One instance of a merchant offering his services for free to “patriots” is Mustafa Ortac, a barber in Istanbul.
“Anyone who brings me a receipt showing that they have changed 200 dollars or Euros gets a free shave and haircut,” said Ortac. “We have to be patriotic and listen to our president’s call.”
The Turkish Central Bank on Tuesday backed Erdogan’s call on people to convert their deposits from foreign currencies to the lira. On the same day, the price for a litre of petrol at the pump passed five lira for the first time in two-and-a-half years.
WHY THE LIRA IS FALTERING?
- It’s all a long way from the heady days of 2008, when the lira traded at around 1.15 to the dollar and Turkey’s economy was punching above its weight.
- Observers say a combination of international factors – such as the US election and potential policy decisions that president-elect Donald Trump might make – and domestic factors such as the Turkish government’s post-coup clampdown and moves to introduce an executive presidency system of governance are behind the lira’s travails.
Critics say that every time a member of government or the president mentions the executive presidency or the need to shift from the dollar, the stock and currency market reacts negatively.
THE MESSAGE WAS THE SAME: THERE IS NOTHING TO WORRY ABOUT
Turkish Prime Minister Binali Yildirim initially said in November that a weakening lira was not a major concern and only temporary, insisting that the country’s economic foundations and indicators were healthy.
But that rhetoric gradually gave way. Instead he said that the dollar was gaining strength against all currencies, not just against the lira, and that this was largely down to the US elections. The message was the same: there is nothing to worry about.
Eventually officials and pro-government media began talking about clandestine forces attempting an “economic coup” to topple the government after previous plots had failed.
After weeks of brushing off as inconsequential the steady loss in the value of the lira, the government has promised to introduce measures this week to stabilise it. Erdogan has called on people to remove their dollars from “under their pillows” and convert them into lira, to show the world how strong the national spirit is among the Turkish public.
The president has also included calls for trading with Russia, China and Iran in local currencies, and for local Turkish businesses to revert to the lira for their business transactions. Rents and leases for commercial properties in Turkey’s urban centres are often based on the dollar or the euro.
The faltering of the lira has been so dramatic that even the moderate wing of the Justice and Development Party (AKP) has questioned the government’s economic policies.
Etyen Mahcupyan, an adviser to the former prime minister, Ahmet Davutoglu, penned a scathing column in a Turkish newspaper asking whether there was anyone in the AKP who understood economics.
Turkish Airlines: Bellwether of the economy
But there are growing concerns that the weakening lira might be an indicator of much deeper economic problems that are now beginning to manifest themselves.
The fortunes of Turkey’s flag carrier Turkish Airlines – which is 51 percent publicly traded and 49 percent government owned – is often a good barometer for the health of the economy in general.
The airline was growing at astronomical rates during the mid-2000s, posting record profits, offering increased routes, services and quality when the Turkish economy was growing at rates close to 10 percent. At that time Turkey was among the most attractive global destinations for tourists.
In stark contrast, Turkish media reported this week that the airline had purchased a custom-made Airbus A340 aircraft, previously built for and delivered to Tunisian dictator Zine El Abidin Ben Ali one month before he was deposed in 2011. Turkish Airlines has not explained the reason behind its purchase of the custom-built aircraft.
Similarly, as the Turkish economy has seen its growth curbed by a host of reasons that include regional unrest, terrorist attacks and domestic political turmoil, the government has proceeded determinedly with massive infrastructure projects.
Later this month, a second underwater tunnel beneath the Bosphorus Strait, which divides European and Asian Istanbul, will be inaugurated. The first tunnel became operational in 2013.
In August, a third bridge spanning the Bosphorus was opened along with sections of the Northern Marmara Motorway, a ring road skirting Istanbul. Toll charges for these are also based on the dollar. And construction is continuing at full speed on Istanbul’s third airport, which is expected to be Europe’s largest.
‘Istanbul is unfortunately in a very bad situation in terms of tourism. We have seen a huge plunge not only in foreign arrivals, but also in local tourists’
– Timur Bayindir, Turkish Hoteliers Association
These massive infrastructure projects are ongoing while two of the country’s largest employment-generating sectors – tourism and agriculture – are in serious crisis.
Last month a farmer held a mock funeral for a crate of tomatoes in the Mediterranean province of Antalya, where agriculture and tourism are the economic mainstays.
The farmer was protesting the loss of Russia as an export market. Political ties with Moscow were restored in July but Russia has thus far not lifted its sanctions on Turkish imports, including tomatoes.
Moscow introduced a host of economic sanctions against Turkey after the Turkish air force shot down a Russian jet near the border with Syria on 24 November 2015.
On 5 December, the head of the Turkish Hoteliers Association warned that some Istanbul hotels would be forced to close down during the winter season due to a lack of visitors.
In a statement released after an industry report showed that Turkey continued to have the lowest hotel occupancy rates across Europe, Timur Bayindir said: “Istanbul is unfortunately in a very bad situation in terms of tourism. We have seen a huge plunge not only in foreign arrivals, but also in local tourists,” he said. “We predict that some hotels in Istanbul will have to be closed down in such an environment.”
And then there’s inflation…
With the lira continuing to post record losses, fears of a spike in inflation are growing among both citizens and officials.
Erkan Aydogdu, a mid-level manager at a private firm in Istanbul, whose commute to work involves a 36km drive, told Middle East Eye that petrol crossing the five-lira mark was a major psychological factor for himself and many of his colleagues.
‘What I do know is that every week I get a little bit less with my money. It is an uphill struggle to make ends meet’
– Bahar Yalcin, pensioner
“I start to get really worried when petrol becomes five lira,” he explained. “This is ridiculous. I have a fixed lira salary, and any raise I get is never enough to match inflation or a stronger dollar.”
“For the past few years I have had to cut back on many things anyway. We eat out less frequently for example. But from a psychological point of view, when a litre of petrol becomes five lira, we worry that we won’t even be able to move anymore.”
Bahar Yalcin, a pensioner, laughed at the idea of free services for changing foreign currency.
“I don’t know anything about the complexities of modern economics. But what I do know is that every week I get a little bit less with my money. It is an uphill struggle to make ends meet,” she told MEE. “I don’t have any dollars to get anything for free. That is for the rich people.”