Currency crisis in Turkey: ‘Things are not going in a good direction’
▶ Families jet to Istanbul and resorts to snap up luxury goods and other items as lira plummets
At a barbershop on the European side of Istanbul, a week before Eid is usually busy, with men anxious to look their best, whether it is a full cut or a beard trim, before heading to their hometowns for the holiday. Not this year.
“The dollar reached seven lira and people are spending less now,” the hairdresser said.
His assistant laughed, then said: “They’re saying it’s fashionable to have a beard, so they’re going weeks without a shave, but they just don’t want to spend any money.”
For ordinary citizens and traders this is one example of the effects of a currency crisis that has driven the Turkish lira to historic lows against the dollar over the past week.
Systemic monetary problems such as high external debt and a current account deficit boiled over when the US, a Nato ally, imposed sanctions on Ankara over the continued detention of Andrew Brunson, an American pastor accused of espionage on behalf of terrorist groups.
The crisis has shown little sign of abating – John Bolton, President Donald Trump’s national security adviser, said a resolution was conditioned on Mr Brunson’s release. President Recep Tayyip Erdogan has positioned his country as one that is under attack by external forces bent on making the Turkish people bow, a message that has been amplified by a pliant news media that is largely controlled by his allies or riven by fear of deviating from the government line.
Some businesses have responded to Mr Erdogan’s call for citizens to rally around the flag, with images on social media that show shops offering to give away coffee or vegetables in exchange for a receipt showing $100 converted into lira, and film of the occasional dollar being burnt, including by a member of the ruling Justice and Development party.
But while the crisis has many geopolitical facets, and involves tit-for-tat sanctions by two Nato allies, ordinary Turks are the ones likely to bear the
brunt of the frayed tempers of their leaders.
Prices of basic goods imported from abroad are rising, most importantly food and other raw materials bought with hard currency.
This is due to the collapse of the lira against a strong dollar as well as inflation, which is higher than 15 per cent.
Businesses that rely on imported fabrics or other material from abroad could go bankrupt, as could those that borrow in dollars but make their money in lira. Or, instead of shutting down, they might have to let employees go.
The costs will affect Turkish citizens who, according to the government’s Statistical Institute survey, spend about 20 per cent of their income on food and non-alcoholic drinks.
Before elections in June, the government allowed larger imports of potatoes and onions amid skyrocketing prices caused by inflation.
In the same month, the prices of basic goods such as dairy products also rose sharply because of a weakening currency and the inflation rate.
Turks who earn salaries in lira will also find themselves locked out from industries that are likely to seek income from clients with hard currency.
Hoteliers are likely to benefit if tourists and foreigners decide to come to Turkey on holiday because of the weak currency making it cheaper to visit.
But to keep up with rising supply costs hotels over the past few days have raised prices for their rooms – doubling them, in some cases – pricing out ordinary workers.
“I don’t know what our suppliers will do but the tourists will bring hard currency and we will survive,” one hotel manager said.
As the currency loses value, those who want to travel abroad will find it more difficult to do so unless they have a bigger financial cushion.
Those who have retirement savings in lira will see limited returns on them during the crisis, particularly if it endures.
At the weekend, Arab and foreign tourists flush with lira queued outside luxury shops in the city, realising that they could buy those high-end products for less amid the currency crash. But there were few Turks lining up.
“A kilo of figs is now too expensive. How will we buy it?” the hairdresser asked. “Things are not going in a good direction.”
Tourists from the UAE are cashing in on the currency crisis in Turkey, taking advantage of holidays and retail prices at a fraction of the normal cost.
Families are hitting the shops in force to maximise on the lira’s record low.
Since the start of this year, the lira has lost nearly 45 per cent of its value because of rampant inflation and mounting concerns over Turkey’s deteriorating relations with the United States.
Yesterday, Dh1 was worth 1.78 lira as opposed to just 0.82 lira six months ago.
Joanna Balkis, 33, an estate agent from Lebanon who lives in Dubai, has just returned from a two-week holiday in Turkey with her husband and two children.
Ms Balkis said the biggest savings were on eating out, and that a three-course meal for her family at the US chain restaurant Chili’s cost only Dh140.
The same meal in the UAE would normally cost Dh1,000, she said.
“I also went to blow dry my hair at a salon in the most high-end street in Istanbul and it only cost me Dh19.6 [35 lira],” she said. “Here in the UAE, we pay Dh150 for a very basic blow dry.
“The prices were awesome. A T-shirt that costs Dh600 at home costs less than Dh100 there.”
Siham Al Hussein, from Fujairah, said that she and her husband had been delighted by their boosted spending power.
Ms Al Hussein said hundreds of tourists were hitting highend shops such as Bulgari and Chanel in a race to grab the best items.
“The prices have dropped to the ground,” she said. “We went shopping for the luxury, high-end brands yesterday and everything is 85 or 90 per cent less than its regular price.
“Everything is peanuts. Whoever wants to shop should go to Turkey now.”
Turkey has long been popular with UAE residents and was one of the top countries for travellers heading abroad for Eid Al Adha this year.
The Hagia Sophia, Topkapi Palace and the Blue Mosque are among the top attractions in Istanbul.
“Istanbul is much-loved for being a short flight away from the Mena nations,” said Salah Mustafa, a spokesman for online travel operator Wego.
“It’s a traveller’s delight in terms of cuisine, natural wonders and cultural gems.
The surge in demand for travel to Turkey began in late June and peaked in late July, as the GCC travellers planned for the Eid holidays.
“This demand has continued in strength over the past few days due to last-minute travel searches to the country.”
Turkish President Recep Tayyip Erdogan has urged his country to do everything it can to extend hospitality to tourists bringing vital spending dollars into the country.
“You are already very hospitable but keep that up and extend it,” Mr Erdogan told his supporters at the weekend. “Because at a time when some people are taking out dollars, they are bringing it to you.”