“There are jobs but no money”: the economic crisis in Turkey begins to be felt | Turkey
IAt a jewelry store near Istanbul’s Taksim Square, Seda opens an elegant black leather clutch and piles her gold jewelry on the counter to discuss the sale of it all. The store owner delicately places gold chains, rings, and a small-scale pendant, before immediately calling a merchant to discuss the latest rates.
“I used to watch the price of gold once a week. Now I watch about 50 times a day, ”says the owner, who asks that his name not be disclosed. He advises Seda to wait – maybe the price will stabilize.
Turkish citizens like Seda, who refuses to give her last name, are frantically trying to find ways to cope as the lire continues to drop. The currency has lost half of its value against the dollar this year, falling almost 30% in November alone. Those without foreign currency or gold to sell are finding other ways to reduce their consumption, avoiding buying meat or turning to government-subsidized bread for food.
As the value of their money plummets, inflation has soared to 21%. Yet President Recep Tayyip Erdoğan has responded with a series of base interest rate cuts – in defiance of economic conventions. After slashing it from 19% in early September to 15%, it was down again to 15% on Thursday, pushing the reading to a new low.
Erdoğan presented this approach as a “war of economic independence” necessary to stimulate exports, foreign investment and job creation, but many citizens are struggling to adapt and survive to this new reality.
Seda says she is looking to sell her gold to buy a house. “My husband said we should get the gold valued. We don’t know what to do because the price of everything fluctuates, ”she said. “We can’t get a loan to pay it off because we can’t trust what will happen with the currency. I do not know what to do.
“My husband loves crypto,” she adds. “I’m honestly trying to get him to stop, it causes fights between us. He completely ignores the Turkish Lira, he thinks crypto is the future.
Erdoğan explained over the weekend how he lowered Turkey’s inflation to 4% previously and promised to hit that 2011 level again, but most economists see his approach as reckless and predict a rate higher than 30% next year. Many Turkish financial figures agree, and the country has had four central bank managers in the past two and a half years, while former finance minister Lütfi Elvan resigned in early December.
“The central bank was purged of all sane people, they were either sacked or left on purpose,” said Jason Tuvey, senior emerging markets economist at London-based Capital Economics. “It’s similar to the Ministry of Finance, Elvan was considered the last sane person in politics and he was replaced by another loyalist from Erdoğan.”
Insisting that his “new business model” will eventually bear fruit, Erdoğan told the public earlier this month: “We know what we’re doing. We know how to do it. We know where we are going. We know what we are going to accomplish ”. He repeatedly encouraged the Turks to take their money out from under their mattresses and put it in the banks. Despite economic reforms aimed at reducing labor costs and boosting exports, Turkey has also increased the minimum wage.
As the lira collapsed, gold traders began to sell in smaller and smaller increments. A vendor in Istanbul’s bustling Istiklal shopping street displays his hottest items of the moment, tiny ingots weighing two grams, one gram, and a miniature half-gram bar, the latter on sale at this time for 480 lire (£ 22).
Another gold and currency trader, Hakki Liça, says his store removed the gold from the front of the kiosk because he was irritated by so many people who came to ask for the latest prices, but didn’t buy. If customers have a lot of money to unload from gold sales, he says, he calls traders in Istanbul’s Grand Bazaar and holds a private sale.
Most of her clients prefer dollars, so much so that some are changing Turkish wedding traditions and pinning foreign currencies on brides rather than traditional gold coins. “It’s more affordable, I guess. Fifty dollars is better than gold, ”he says.
“About 70% of customers are Turks, buying in panic. Maybe they have debts that they want to get rid of, ”he adds, leaning in to whisper:“ The Turks are buying many. “
Read it fell 8% on Friday, while the central bank declared they had stepped in to support the currency for the fifth time in a month. Turkey’s stock market, Borsa, has been forced to halt trading twice to avoid further losses.
“Foreign exchange interventions could continue, but they are neither a good strategy nor a sustainable one,” said Selva Demiralp, professor of economics at Koç University and former economist at the US Federal Reserve. “In Turkey, the root cause of the financial crisis is lax monetary policy itself. So, unless the central bank takes a tighter stance, the demand for dollars will continue. “
Government decisions are increasingly felt in the pockets of the average person. “Everything is expensive right now, we are barely making ends meet. My family moved in with my stepfather to avoid paying rent, ”says Gunay Akil, standing in front of a supermarket known for its low prices.
“There are jobs but no money,” she adds, explaining that her husband’s business that makes kitchen interiors pays its employees in half-month increments, leaving most of the money. between them with arrears. She points to her shopping that day, a kilo of onions and a big cabbage. “Here’s what’s for dinner tonight – bread, yogurt and cabbage soup.”
Akil was pessimistic about the year ahead: “I have no hope that this inflation will stop.
The government’s promises of an economic boom are proving increasingly unpopular with the Turkish electorate, and seem likely to affect an election scheduled for 2023 or even before.
Demiralp, who has teamed up with political scientists to study voting intentions, formulates it carefully. “Our preliminary research using data from November shows that among those who voted for the AKP [Erdoğan’s party] in 2018, there is a significant relationship between economic dissatisfaction and a reduced likelihood of voting for the current government.
At the Gold Seller, Seda doesn’t want to say how she intends to vote, but makes a cautious prediction: “I think some things will change.”
Additional reports Gökçe Saraçoğlu.