Turks Scramble as Lira Falls and Prices Soar
“My pension is not enough,” Zerrin Yildirim said as she sat with a friend on the steps of their apartment building in an old quarter of Istanbul, bemoaning the prices in the nearby fruit and vegetable market.
Turks across the country have been thrown into a frenzy as the Turkish lira has lost 25 percent of its value since last week. A standoff between Turkey and the United States, which has imposed sanctions, accelerated a long decline in the lira this year over fears of mismanagement of the economy.
President Recep Tayyip Erdogan is making several speeches a day, casting the economic crisis as a national struggle, and laying the blame for the lira’s fall on foreign powers. In the latest, on Tuesday, he called on Turks to boycott American electronic products.
But there are already signs that the quiet panic setting in among ordinary citizens is threatening to undermine Mr. Erdogan’s nationalist appeals.
Mrs. Yildirim, 55, a retired intensive-care nurse, blamed people who had voted for the president, even as the economic decline and rising prices could be felt before June’s election.
“People always complained about prices,” she said. “But they still vote for the one guy they complain about. We used to call such people sheep, but sheep are clever. When it rains they go into the barn, not under the tree. But these people are more stupid than that. They still voted him in.”
Now, analysts warned, one effect of the steep depreciation of the lira was almost certain to be runaway inflation, which amounts to an instant pay cut, especially for the poor and middle classes.
Already at 15 percent, inflation in Turkey will soar in coming months, predicted Atilla Yesilada, an Istanbul-based consultant at Global Source Partners, a management consultancy firm, and a political commentator.
“Every 10 percent depreciation of the lira leads to a rise of inflation of 2 percent,” Mr. Yesilada said. “In three months inflation will be 20 percent. That is the equivalent of losing one-third of your salary — it is a tremendous cost.”
Mr. Erdogan has long insisted on maintaining low interest rates in his pursuit of strong growth, and rejects the widely accepted economic orthodoxy that inflation is controlled by raising interest rates. As the lira fell in the weeks before the June election he was persuaded by his senior officials to agree to a modest interest rate hike.
But since then he has announced his determination to take greater control of monetary policy — and of the Central Bank — and has resisted calls for further interest rate hikes, even after the lira’s dramatic fall on Friday.
It is the kind of interference in the economy that has already frightened investors and contributed greatly to the drop in the lira, long before the current standoff.
The fallout could hurt Mr. Erdogan’s Justice and Development Party in local elections scheduled for March of next year, Mr. Yesilada said.
The party faltered in the recent parliamentary elections, even as Mr. Erdogan won the presidential election, and voters may punish the party even more in the local elections, which have long been an important base of Mr. Erdogan’s power.
Mr. Erdogan has tried to turn the crisis to his political advantage by pushing his nationalist stance.
For now, the president’s opponents have lined up behind him in his dispute with the United States over Turkey’s detention of an evangelical preacher, Andrew Brunson, and some 20 other Americans swept up in Mr. Erdogan’s crackdown after a failed coup two years ago.
The Turks have demanded, to no avail, that the United States extradite a Pennsylvania-based Islamic preacher blamed for orchestrating the coup, Fethulla Gulen.
Veterans and Mr. Erdogan’s supporters have held nationalist rallies, declaring that they will convert their dollars into Turkish lira in support of the country. Few seemed to believe that they actually would, however. Many Turks have long hedged against a decline in the lira by switching savings to foreign currencies.
Mr. Erdogan may manage to ride out the crisis thanks to chance. Next week, the Muslim holiday Eid al-Adha falls between two weekends, giving Turks nine days of vacation. Banks will be closed, and the government will have a chance to recover.
Still, Mr. Erdogan’s call for Turks to boycott American electronic goods, singling out Apple, was swiftly lampooned on social media, not least because the president himself is well known for owning and using an iPhone.
“Every product that we buy in foreign currency from outside, we will produce them here and sell abroad,” Mr. Erdogan said during a speech in Ankara, drawing applause and cheers. “We will boycott the electronics products of the U.S.”
“If they have the iPhone, there is Samsung” as an alternative, he continued, referring to Apple’s rival in the smartphone business.
But it is not quite that easy.
An electronics store in one of the busiest downtown markets was empty at 11:30 a.m. The shop owner, Suat Durnah, 63, leapt up from his chair in his eagerness to vent his fears and frustrations to a reporter.
“The market is very slow,” Mr. Durnah said. “I only just made my first sale of the day.” Normally he said, he would have made six or seven sales by that time.
Almost everything the store sells comes from China, but it pays for goods in U.S. dollars, he said. As the lira has depreciated, the Turkish prices have doubled this year, and tripled since last year, he said.
He pointed to a desk telephone. “Last year, that telephone was selling for 28, 40 lira. Now it is 85, 90 lira,” he said.
Political analysts say Turkish voters can be unforgiving when their pockets are hit.
“The people will make the choice over the hardships being forced on them, and some loose nationalist ideal being offered them,” said Mr. Yesilada, the commentator.
On the streets of Istanbul, the anxiety was evident. Restaurateurs and cafe owners are already struggling with a 50 percent drop in business over the past three years after terrorist attacks scared away many foreign tourists.
Now other Turkish businesses are feeling the downturn.
A storekeeper, Mustafa Yuksel, 30, who sells gardening equipment and insecticides, most of it imported, said he had raised his prices as soon as the lira fell on Friday.
“To stand on our feet, we immediately raised our prices,” he said.
People who needed to buy were surprised but going ahead. But some, including the local city municipalities, were holding off, he said.
Business was also down at the Sehremini Market, where the pensioners did their shopping. The salesmen attributed the fall in sales to the summer holidays, since many families leave the city, but several admitted they were worried.
Few would blame it on Mr. Erdogan, however. A fruit seller, Sedat Eski, blamed it on the British, alluding to one of many conspiracy theories encouraged by Mr. Erdogan — that foreign powers were behind the currency crash in order to undermine Turkey.
“All the rich people pulled out their money at 2 a.m.,” Mr. Eski said. Turkey’s richest people had moved their money to the United Kingdom, he said. “And who do you think is pulling their strings.”
About the only ones who seemed to be enjoying the plunge in the lira were foreign tourists, who were snapping up sudden bargains on luxury goods in the high-end district of Nisantasi.
Twenty-five tourists from Dubai, Saudi Arabia and Iran were lined up outside the Louis Vuitton store on the corner of Abdi Ipekci Street, where luxury fashion houses have their boutiques.
“I’ve been doing a lot of shopping,” said Amanda Ibrahim, 28, an economics assistant who was on a trip from Sweden. Prices were down 40 percent because of the exchange rate, she said.
“A couple days ago, it was more expensive here than Sweden,” she said.
In the Zorlu Center, one of Istanbul’s biggest shopping malls, salespeople said they had almost sold out their stock to Asian tourists paying in Turkish liras.
An American student, Rachel York, 21, who works at the Robert College of Istanbul, was less pleased.
“We agreed on getting paid in Turkish lira at the beginning of summer,” she lamented, “and now we regret it because we essentially lost one third of our salary.”