President Recep Tayyip Erdogan doesn’t appear too concerned even though the value of the Turkish currency fell by 45 percent versus the dollar this year.
Despite the lira’s this week flirtation with record lows, Turkey’s longtime leader is continuing his “economic battle of independence,” which is supported by low-interest rates.
What does Mr. Erdogan’s advocacy of a model that detractors fear could lead to skyrocketing inflation, increased unemployment, and poverty entail for Turks?
His unconventional economic strategy of keeping interest rates low to increase Turkey’s economic growth and export potential with a competitive currency is the obvious cause of the Turkish lira.
Many economists believe that increasing interest rates is the best way to combat rising inflation. However, according to Mr. Erdogan, interest rates “make the rich richer and the poor poorer” and are therefore wicked.
At a nearby fruit store, Sevim Yildirim told the BBC, “Everything is so expensive.” With these prices, it’s impossible to prepare even a main dinner for a family.
Turkey’s annual inflation rate has risen above 21%, yet the Central Bank of the Republic of Turkey, which Mr. Erdogan revamped, just dropped interest rates from 16 to 15 percent, the third reduction this year.
Inflation in Turkey is skyrocketing
Global inflation is on the rise, and central banks are discussing raising interest rates. But not here, according to Mr. Erdogan, who thinks inflation will eventually decline.
Three presidents of central banks have been fired by him in the past two years, and his finance minister was only recently removed. Thus, the value of the lira keeps falling.
The price of consumer goods is directly impacted by the strengthening of the dollar versus the lira because Turkey’s economy depends largely on imports for the production of items ranging from meals to textiles.
Consider the tomato, a key component in Turkish cooking. Producers must purchase foreign gas and fertilizers to cultivate tomatoes.
According to the chamber of commerce in Antalya, a major agricultural center on the south coast, tomato prices increased by 75% in August over the same month last year.
Sadie Kaleci, who cultivates grapes in Pamukova, a small hamlet three hours’ drive from Istanbul, wonders, “How can we earn money out of this?” She laments, “We sell cheap, but buying costs are costly,” pointing to high prices for diesel, fertilizer, and the sulfur that is sprinkled on the vines.
Feride Tufan, a farmer, on her vineyard
Farmer Feride Tufan claims that selling grapes does not bring in any revenue.
Feride Tufan, a different farmer, argues that selling her possessions is the only way she can survive: “We can sell our land and vines to pay off our debt. We won’t have anything left after we sell everything, though.”
Prices change every day as a result of the currency’s increased volatility. Just for producers, inflation has increased by 50%.
While out shopping at a market, Hakan Ayran declares, “I’ve reduced all my expenses.” “To pay the bills, nobody shops and everyone eats less.”
Employees at supermarkets announce price increases on social media and post product labels from before and after the change. They include things like toilet paper, tea, coffee, soap, and margarine (see top).
To justify its increasing charges, a bakery in Izmir, Turkey’s third-largest city, listed the rising costs of its basic components, including wheat, oil, and sesame, and concluded with the prayer “May God be with us.”
Due to the volatility and inflation of the lira, which is an issue for the private sector, most businesses have discovered that it is more advantageous to store goods than to sell them.
The result is increased poverty and a growing disparity in income and wealth.
Furious young Turks
Outside of gas stations and municipal government buildings, lines develop where inexpensive bread is being sold.
Additionally, protests and early elections have been called by opposition groups. On November 23, there were a few minor protests and a large number of arrests as the value of the lira dropped 18% in a single day.
But among younger Turks on Twitter, Twitch live streams, TikTok videos, and YouTube, public discontent is most obvious.
“I have zero satisfaction with this administration. I do not see myself having a future in this nation“a young person quoted in a YouTube video told a reporter.
In Turkey, one in five young people is without a job; the situation is considerably worse for women.
- Getty Turkey has an estimated 84 million people.
- $720 billion GDP, up 7.4% in three months
- Youth unemployment is 22%.
- The Turkish lira depreciates against the dollar by 45% in 2021
- Rate of inflation: 19.9 percent
According to the OECD, Turkey has the fourth-highest rate of youth who are not in a job, education, or training worldwide.
Turkish adolescents contrast their living conditions with those in other nations and are unhappy with what they find.
One 18-year-old claims, “For a young person in the US or Europe, it’s easy to get an iPhone with their salary.” “Even if I labor nonstop for years, I still cannot afford it. I’m not worthy of that.”
Turkish politics, which have been dominated by Mr. Erdogan’s Justice and Development Party (AKP) since 2002, are poised to be significantly influenced by this generation.
Nearly nine million Turks who were born after the late 1990s will be able to cast ballots in the upcoming election in 2023, which could be problematic for the AKP.
A viral video of a mother praising President Erdogan to a reporter was countered by her eight-year-old son, who criticized him for how he handled recent tragedies.
Impossible to speculate
After the financial crisis of 2008, the ruling party received an influx of foreign finance, which contributed to its victory.
However, a large portion of Turkey’s economic expansion was due to credit and investment by the government that favored the building sector.
Production still depends on imports as a result, and currency swings have a big impact on the economy.
Few people believe that Mr. Erdogan’s new economic strategy will save the Turkish currency.
Economist Arda Tunca asserts that there can be no predictions for the future in the face of such ambiguity.
“For the first time, we are utilizing a model that is wholly independent of economic theory. Even during emergencies, we were able to predict what would occur. It is now impossible “said he.