In theory, Turkish businessman Vahit Yilmaz should benefit from the weak lira: after the lira crash slashed production costs in US dollars, orders from abroad are pouring into Turkey’s US$30 billion textile and apparel industry.
But he said that the probability of his clothing wholesale business surviving in the next 12 months is only 50-50. The cost of fabrics, yarns and other inputs are all denominated in U.S. dollars, and prices have soared. Domestic producers such as Yilmaz in Merter, Istanbul’s ready-to-wear wholesale district, are preparing for the turbulent spring.
“At this exchange rate, Turkish textiles are almost free,” said the 35-year-old. “When the dollar was rising steadily, business was very good. Now it is dangerous.”
Recep Tayyip Erdogan hosted 50% Slip in currency Since the beginning of this year, despite rising inflation, he has asked the central bank to cut interest rates several times. On Thursday, the central bank cut interest rates for the fourth consecutive month. The Turkish President argued that cheaper currencies would help this country of 83 million people enjoy booming exports, investment and job creation.
But critics of the president say that he is submitting to the state Huge economic experiment. Former central bank governor Durmus Yilmaz said this month that he is turning Turkey into a “lab of crazy ideas”.
After Erdogan ordered the central bank to cut interest rates several times, the lira slipped this year
In recent months, as the president initiated another easing cycle, he reportedly used China’s economic transformation after the reforms in 1978 as evidence that his model will achieve results.
However, Ali Akmic, an economic expert on China and Turkey at Yamaguchi University in Japan, said that although Beijing did devalue its currency in the 1980s and 1990s, it implemented a clear In time, it transformed into the second largest economy in the world. “Turkey does not have any clearly defined industrial policies,” he warned. “We don’t know what industry they want to promote.”
A London banker, who asked not to be named, had expertise in both economies, and he put it more bluntly. He said: “It is economically crazy to think that a country can build an export-oriented economy solely on abandoned currencies.” “If this is the case, Zimbabwe will become a technological superpower.”
Despite the increasing frustration of voters and the business community, Erdogan is still determined to advance interest rate cuts, which has sparked speculation in Turkey that certain electoral districts must benefit from the devaluation of the lira. However, Atilla Yesilada, an analyst at the consulting firm GlobalSource Partners, said, “This is not a policy that favors any identifiable constituency, including his family… or his cronies.”
Some companies have benefited from currency depreciation. “Most companies listed on the Istanbul Stock Exchange have benefited from the weak lira,” said Selim Kunter, an equity analyst at Ak Yatirim in Istanbul. He pointed out that publicly listed airlines, defense groups, automakers and chemical manufacturers are all companies that enjoy foreign currency-denominated income and Turkish lira-denominated staff costs.
The success of these sectors promoted the prosperity of exports and promoted Economic Growth It is expected to exceed 9% this year. But it may hurt not only companies that rely on imported energy and raw materials, but also ordinary companies, at the cost of 30% or more inflation in the coming months. Turks are already struggling With the soaring cost of living.
“Erdogan puts exporters above households,” said Jason Tuwei of the consulting firm Capital Macross. “If you think about his support base, it doesn’t make sense at all.”
Many large exporters are also critical of currency fluctuations, saying that this makes it difficult to price and plan ahead for their products. Tusiad, a group representing large industrial companies, accounts for 85% of Turkey’s foreign trade (excluding energy). It warns that the business world needs stability most.
Musiad, a business association with close ties to the ruling party, recently expressed uneasy views in a rare criticism of the president’s practices.
“Businessmen need to know what the exchange rate will be in two to three months and how much it will rise,” Mahmut Asmali, the group’s president, told Turkish business newspaper Dunya last week. “Exchange rate charts shouldn’t be like charts for hypertensive patients.”
Although home sales are booming, the construction industry, which has close ties to Erdogan and other ruling party officials, is also complaining. The industry’s data accounted for about 5% of the Turkish economy, and the industry’s data warned that the industry is being squeezed by high raw material and energy costs, both of which increased by more than 90% year-on-year in November.
Yesilada said that Erdogan just “doesn’t have a game plan” and pointed out that the Turkish authorities have spent billions of dollars. U.S. dollar defends the lira In recent weeks, it has also praised the advantages of cheap currencies. “We can discuss for hours. It doesn’t make any sense,” Yesilada said. “There is no logic.”
Apparel producer Yilmaz said that domestic sales, which usually account for half of its business, are “dead”. He hopes that export sales can offset the loss.
But he predicts that half of his neighbors in Merter will disappear within six months. Although this practice is prohibited, they will still be driven away by dollar-denominated rent.
“Now, I am optimistic that we can weather this storm,” he said. “But I may also leave soon.”