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According to the World Bank, GDP per capita has returned to 2010 levels, with more and more Turkish citizens protesting while saying that “everything is incredibly expensive.” (EPA photo)
A few days ago, the Turkish pound fell to new lows against the dollar and the euro, but Hakan Bulgurlu did not panic. He is the CEO of the Arcelik Group, which produces home appliances, and he knows what a currency crisis means. “We do business in Pakistan, Bangladesh, India, Turkey, South Africa. Going through crises, you become more difficult and you learn to deal with them.”
In Turkey, however, this is the second currency crisis in two years, which in combination with the pandemic carries greater risks of economic collapse. Economists predict a sharp slowdown as the depreciation of the Turkish pound reestablishes the risk of a further rise in the prices of imported products such as drugs and fuels. Arcelik, which employs 32,000 people, half of them in Turkey, has already hedged against exchange rate volatility. It was one of the ways that the Turkish business class adapted to economic instability. That is why Mr. Bulgurlou believes that Turkey will face the crisis as it has in the past. Turkey’s economic destiny has geopolitical implications. Recently, its armed forces have moved aggressively in the eastern Mediterranean against two of its NATO allies, Greece and France. Analysts interpret this aggressive behavior as an attempt by Erdogan to sow nationalist sentiment and distract the Turks from their financial troubles. Last year his power was affected when his party lost the municipality of Istanbul in the municipal elections.
The rapid devaluation of the pound, which lost 7% of its value in August, has already caused a rise in prices for food and basic necessities, causing public unrest. “Everything is incredibly expensive,” said Derry, a math teacher who did not want to be named because she works in the public sector. As she emphasizes, she is forced to add more onions to her meatballs to show off more, because after the pound’s drop “the Turks have become poorer.” Bulgurlou insists that Turkey maintains forces such as a strict work ethic and a young population that wants to consume. Perhaps Turkey’s future relations with its allies in the West will depend on how justified Bulgurlu’s belief in her country’s resistance is.
The Arcelik Group, which has been supplying washing machines, refrigerators and televisions to the Turkish middle class since 1955, embodies the rapid economic growth experienced by the Turks in the recent past. From 2000 to 2013, the median income more than tripled and poverty was cut in half. However, according to World Bank data, GDP per capita has returned to 2010 levels.
In past crises, the Turks were comforted by the idea that by devaluing the pound they were reaping some benefits, such as the massive influx of tourists seeking cheap vacations. But none of that is happening now with the pandemic and the blow it has caused to tourism. In theory, the devaluation of the pound means more competitive Turkish exports. This is true if foreigners keep buying.
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