Slump in lira squeezes Istanbul businesses

ISTANBUL, May 23, (RTRS): Turkish business is feeling the pain of the dramatic slump in the lira, with many firms squeezed by higher rents and import bills and consumers holding back on spending in the hope the currency will rebound.

The currency has lost a fifth of its value this year, fuelling Turkey’s double-digit inflation and hitting many storeholders who pay their rent in dollars.

In Istanbul’s Cevahir Mall, which sells a mix of high end and affordable clothing and electronic goods, retailers said their businesses, which run mainly with dollar-denominated overheads, were suffering.

Nedim Soy, owner of a franchise for the Turkish white goods producer Vestel, said the weak lira had pushed up costs, much of which were priced in foreign currency.

“Every month, there is a price increase of 4-5 percent due to the instability in the exchange rate,” he said.

Soy was one of nine retailers in large and medium-sized firms who spoke to Reuters in the mall whose goods are both locally made and imported. The mall was quiet at mid-morning during a visit this week.

Several of them, pointing to largely empty halls, said sales were down and customers, hit by higher exchange rates, were unable to afford price increases.

Some shoppers in the mall said they were tired of the rapidly increasing prices in dollar-based goods, especially in technology products where Turkey is almost completely reliant on imports.

“During these times, as consumers, we stay away from dollar-based products,” said Mutlu, a portfolio manager. Speaking outside the mall, he said he was holding off buying expensive foreign products until the lira stabilised.

“I’m waiting for the election and after,” he said.

President Tayyip Erdogan sparked a sell off in the already weakening lira last week when he said he planned to take greater control of the economy after next month’s election, deepening concerns about his influence on monetary policy.