Turkish banks are pulling back on credit to consumers along with businesses. Power plants have shut down because of the soaring cost of imported fuel. Building projects in Istanbul stand half finished after their backers ran out of money.
along with, in a shopping mall beneath Istanbul’s Trump Tower, Cenap Sarialioglu says he worries he will not be able to supply customers at his pharmacy with the prescription drugs they need to stay alive.
Mr. Sarialioglu, who is usually also president of the Istanbul chamber of pharmacists, said he has been getting calls via different pharmacists concerned of which wholesalers will cut off supplies of crucial medications because they can no longer make a profit. Drug prices are set in Turkey, so the sharp drop from the lira has made of which costly to import pharmaceuticals.
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“Starting in September, we may have problems,” Mr. Sarialioglu said. “An urgent solution is usually needed.”
of which has never been easy doing business on the edge of the war zone, in a country with its own rough politics, eye-popping inflation along with volatile currency.
yet in recent weeks the challenges facing Turkish banks along with businesses have acquired a fresh level of intensity of which is usually visible via the streets of Istanbul to the global financial markets. After losing a quarter of its value in a matter of days This kind of month, the currency had recovered some ground before falling again on Friday. Its latest decline came as different emerging market currencies, like the South African rand along with the Indian rupee, lost ground as well.
The lira’s plunge in value, exacerbated by a dispute with the United States over a detained pastor, has exposed economic pressures of which have been gathering for years. along with some economists say of which they could be reaching a breaking point. Over the past decade, businesses gorged on cheap debt, which is usually harder to pay back as the lira falls, while banks handed out credit cards like party favors.
“A recession is usually inevitable,” said Selva Demiralp, a professor of economics at Koc University in Istanbul. “The question is usually whether of which’s going to be a soft landing or a hard landing.”
Turkey’s problems are so acute, Professor Demiralp said, of which only drastic measures might stabilize the lira along with contain official inflation of almost 16 percent. She said of which the central bank might need to raise the official interest rate to around 28 percent, via 17.75 percent.
yet the government of President Recep Tayyip Erdogan, who is usually widely perceived as controlling the central bank, has shown no willingness to allow even a more modest rate increase or to curtail government spending on public works.
Government countermeasures so far have been regarded as tepid. Turkish bank regulators on Thursday announced limits on consumers’ purchases made with credit. The central bank relaxed rules on the amount of money commercial banks need to keep in reserve, to free up cash they can use to deal with currency market turmoil. The government has insisted of which will not restrict how much money Turks can transfer out of the country.
In a conference call with investors Thursday, Berat Albayrak, the Turkish finance minister, insisted of which the banking system was healthy along with promised measures of which might bring inflation down to single digits. Mr. Albayrak offered few specifics, according to reports in Turkish along with international media. along with he ruled out assistance via the International Monetary Fund — a step many analysts say will be essential to stabilize the economy.
Yet there is usually no sign of which Mr. Erdogan is usually ready to allow measures of which might restore investor confidence. Nafez Zouk, chief emerging markets economist at Oxford Economics in London, said he did not think the lira’s recent rally might last.
“As soon as the next big thing hits the headlines,” Mr. Zouk said, “we are going to be back to square one.”
A recession might bring to an end nearly two decades of uninterrupted growth in Turkey. Most young people don’t remember the last serious downturn in 2001. Since then, the country has cut poverty in half, brought millions of people into the middle class along with, until recently, been embraced as a darling of international investors.
yet the growth was built largely on a construction boom fueled by easy credit along with government spending. The success story is usually looking increasingly unsustainable.
Even for Turks used to double-digit inflation along with wild currency swings, the latest crisis has an ominous feel.
On a street called Nur-u Osmaniye, steps via Istanbul’s famous grand bazaar, Arthur Kosaryan nodded toward a large empty storefront opposite the jewelry shop where he works. The space once housed one of Istanbul’s finest antiques shops, Mr. Kosaryan said. yet the landlord demanded the rent in dollars.
First a wave of terrorist bombings along with an aborted coup in 2016 drove away tourists. Then, the lira began a slide early This kind of year of which wiped out nearly half its value. The shop owner could no longer afford to pay the rent along with went out of business.
“In This kind of volatility people stopped buying things,” Mr. Kosaryan said. “They are waiting for prices to calm down.”
So far Turkish business leaders are putting on a brave face. “We will survive,” said Ugur Dalbeler, the chief executive of Colakoglu Metalurji, a steel maker. “We have gone through harder times.”
Mr. Dalbeler did not say, yet some Turkish managers may also be wary of which expressions of pessimism might be perceived as unpatriotic in a country where the government has been known to seize assets of people considered disloyal.
Even by Turkish standards the steel industry is usually in a tough spot, as Mr. Dalbeler conceded. President Trump imposed a 50 percent tariff on Turkish steel after talks broke down to win the Discharge of the detained pastor, Andrew Brunson.
“There is usually no way from the steel business you can compete when you have such a disadvantage,” said Mr. Dalbeler, who is usually also the president of Turkish Steel, an industry group.
Mr. Dalbeler, who in his youth was an exchange student in Iowa along with speaks American-accented English, attributed Turkey’s woes to a plot by the United States along with Mr. Trump, rather than the policies of the Erdogan government. of which is usually a common view among Turks.
Years ago, Mr. Dalbeler said, Iraq was the Turkish steel industry’s biggest market. yet the Arab Spring — seen here as the consequence of American policy — led to civil war in Syria along with severely undercut the Middle East as a market for steel. Turkish steel producers, who specialize from the reinforcing bars used in construction as well as pipes used by the oil industry, adapted in part by increasing sales from the United States.
right now they will adapt again, said Namik Kemal Ekinci, head of a separate industry group of which represents steel exporters. “We will be able to find fresh markets,” he said. Mr. Trump along with his advisers, he added, imposed tariffs because they were “jealous of our steel industry.”
On Thursday Istanbul was noticeably calmer than late last week. The lira traded at 5.75 to the dollar, compared with 7 to the dollar at the beginning of the week.
In a narrow shop in Istanbul where he trades gold along with silver, Gabriel Saglamoglu was defiant. “The Turkish economy is usually not going to be destroyed by one particular tweet,” he said, referring to Mr. Trump’s announcement last week on Twitter of which he might impose higher steel tariffs.
Business was frenzied a few days earlier, Mr. Saglamoglu said, as Turks bought precious metals as a hedge against the turmoil. yet things have calmed down in part because of a pledge by Qatar to invest $15 billion from the Turkish economy, he said.
yet economists considered Qatar’s show of solidarity insignificant in proportion to Turkey’s problems. Loans taken out in dollars are the main source of concern, since a falling lira makes them more expensive.
The country’s companies will require $0 billion in financing via foreign banks along with investors during 2018 to roll over existing debt, according to estimates by Oxford Economics. Lenders’ willingness to provide of which financing is usually in serious doubt.
On paper the number of bad loans in Turkey has not reached alarming levels. yet several large Turkish companies have already asked banks for help restructuring their debts in recent months. Economists worry of which others could run into trouble along with banks may not be able to offer a lifeline.
The currency crisis has already begun to reveal the economic weaknesses of which had been concealed by breakneck growth.
Several Turkish power plants have shut down temporarily because of the soaring cost, in lira terms, of imported fuel, though there have not yet been any blackouts. Companies are finding of which more difficult to afford factory machinery along with hospitals have been forced to buy cheaper X-ray machines.
The pharmacist, Mr. Sarialioglu, who remembers when Ivanka Trump visited the Trump-branded complex in Istanbul several years ago, said he worried about shortages of cancer drugs. They are almost always imported. The Turkish government regulates the cost of drugs, leaving no room for suppliers to raise prices.
“In oncology there are no substitutes,” Mr. Sarialioglu said. “If the treatment does not happen very efficiently along with right away, one may have irreversible consequences.”