ISTANBUL—On a wide staircase across the street of a popular bar in Turkey’s largest city, a crowd of people sit at sunset, enjoying cheap drinks and snacks brought from home. They used to go to bars, and they would still like to go. They can’t stand it.
ISTANBUL—On a wide staircase across the street of a popular bar in Turkey’s largest city, a crowd of people sit at sunset, enjoying cheap drinks and snacks brought from home. They used to go to bars, and they would still like to go. They can’t stand it.
A waiter at the leaning bar said, “It’s getting worse.” “Pay is low, but prices keep rising. It’s disappointing for all of us,” he said on condition of anonymity, fearing that the remarks would cost him his job.
Inflation has been a problem in Türkiye for a long time. Last October, inflation hit a 24-year high of 85.5 per cent on an annual basis, meaning prices almost doubled. This year, inflation has moved from very high to somewhat high and is moving back to unsustainable. what kind of inflation is there in Türkiye Monthly This premise causes panic in the United States or Western Europe on an annual basis. In June, the year-on-year inflation rate was close to 40 per cent. In July it was around 50 per cent and in August it was around 60 per cent. Investment banks and the government agree that inflation will probably reach 65 percent by the end of the year. Ankara is optimistic that the inflation rate will be halved by next year.
The spike in inflation is attributed to Turkish President Recep Tayyip Erdogan’s belief that low interest rates will somehow curb inflation. Experts say the reason it is still in check is his late abandonment of the same approach, marked by a sudden U-turn in monetary policy.
For a long time, Erdogan insisted that Turkish Central Bank interest rates be kept relatively low to keep credit flowing and the economy running, even though this was a recipe for inflation. Ahead of general elections this May, Erdogan raised Turkey’s minimum wage and used the central bank’s foreign exchange reserves to prop up the lira to help stabilize the currency. It was a short term bet.
For now, Erdogan seems to have found the gospel after the election. In late August, the Central Bank raised interest rates significantly for the third time since the May election. Interest rates which were at 8.5 per cent, and then shot up to 17.5 per cent in July, are now at 25 per cent. Higher interest rates should reduce inflation by limiting the supply of easy money in an economy. In theory, they should also support a country’s currency, although lira traders haven’t gotten the memo. The Turkish lira, which peaked at par with the US dollar in early 2008, is now worth a little less than 4 cents.
Erdogan has signaled a change of course by appointing former deputy prime minister and Merrill Lynch banker Mehmet Simcek as finance minister, as well as Hafez Gay Erkan as governor of the Central Bank. Simsek stressed on Thursday that markets have faith in Erdogan’s economic leadership. But as the musical chairs are shifting, many Turks are running out of both cash and patience.
“Many household incomes are insufficient to keep up with inflation – poverty is one of our biggest problems now. Turkish economist Mustafa Sonmez said, “We are seeing an abnormal increase in inflation and people are worried and frustrated.”
Sociologist Ugur Dolgun of Istanbul University said, when inflation gets so high, it affects the whole society. With a thinner wallet, “people go out less, eat less, and skip cultural outings. Food security becomes their main priority. Stress levels are high, such as depression, anxiety and even domestic violence,” he said. Education is not much better.
“Students now prefer evening classes or distance learning because they need to work during the day,” Dolgun said. “They are thrown out of academic life because of economic problems. It is all a vicious cycle that we need to break out of.”
Hatice, 20, wanted to share her story but asked to use a pseudonym, saying she felt criticizing the economy could adversely affect her. A sociology student in her junior year, she decided to drop out of school for the fall semester, saying that financial struggles had forced her to drop out.
“I decided to work full-time instead,” he said. “Of course I don’t want to give up my studies, but right now I can’t even afford the campus accommodation. The economic crisis affects us students a lot – not being able to afford the education as well as the fear of not finding work in our field after graduation.” For now, she has moved back with her parents and has postponed her junior year, spending her time working for an online retailer.
Türkiye’s economy has struggled before. The 2001 crisis saw the collapse of the stock market and the fall of the lira, but when Erdogan came to power shortly afterwards, he implemented new reforms. He promoted exports and expanded foreign investment, which led to strong economic growth. Lira was doing well; The economy was growing rapidly. Many Turks quickly rose to prosperity and their economy was considered a miracle. Hoping to further boost this growth, Erdogan eventually cut central bank interest rates – as low as 8.5 percent in February – before recently withdrawing. Many economists considered the policy unorthodox, as low rates would naturally spur inflation as well as growth.
But while many Turks avoid going out to drink or eat in cities like Istanbul, one industry has remained untouched: tourism. Mediterranean Turkey attracts millions of tourists every year, according to the Turkish Statistics Institute, with the first six months of this year receiving more than 22 million tourists and generating approximately $22 billion in revenue.
Tourists coming from far and wide can spend their time without worries. Only the service staff are worried.
“The tense atmosphere on the streets is evident,” said Istanbul resident Samira Shah.
“The people of Türkiye are worried, even tense. A few days ago, I woke up after midnight to a delivery man who, at the end of his work day, noticed that he hadn’t charged me enough for lunch delivery. He was aggressively ringing my doorbell and shouting that he needed 100 lira immediately [$3.75] He didn’t charge me by mistake otherwise his boss would have taken it from his already low salary. He was desperate. I think there are many people like him.”
