New York Times: Turkey faces new economic problem

The currency crisis which Turkey is experiencing is the second in less than two years, and it threatens of an economic collapse in the country amid the repercussions of Corona, according to the American "New York Times" newspaper.

Economists expect a sharp decline in economic indicators in Turkey, accompanied by rising prices for imported goods such as medicines and fuel.

International investors are alarmed by the financial maneuvering and the cheap credit flow that President Recep Tayyip Erdogan has used to support the lira and fuel economic growth.

Turkey's economic fate has geopolitical implications. In the recent period, the Turkish armed forces have acted aggressively in the Mediterranean towards France and Greece which are NATO allies.

Analysts view the confrontations as an attempt by Erdogan to stir nationalist sentiments and distract Turks from their financial problems, especially after his grip on power was shaken last year after his party lost control of the Istanbul municipality.

The sharp decline in the value of the lira which lost 70 percent of its value in August has already pushed up the prices of food and other essentials which led to the discontent of citizens.

The newspaper quoted from Mrs. Derya (she did not prefer to mention her last name because she is a government employee) and a 41-year-old math teacher saying: "Everything is incredibly expensive."

Derya revealed that she was mixing more onions in meatballs to make them bigger, and while shopping in an Istanbul market, she said: "We have become poorer" due to the drop in the lira.

During the period between 2000 and 2013, average income per capita in Turkey doubled to more than tripled, poverty was halved, and Turkey entered the ranks of middle-income countries.

But the per capita economic output fell to its lowest levels in 2010, according to World Bank data, which was reflected in the value of the currency and then the purchasing power of the individual.

The Turkish government is now pressuring banks to lend to more citizens, which helps support consumer spending, "but that fuels inflation" according to specialists.

The annual inflation rate is about 12 percent, and the decrease in the purchasing power of the lira is one of the reasons for the loss of its value against other currencies.

In addition, many foreign investors have lost confidence in Turkey during the recent crisis, particularly in 2018, which means that there is little demand for lira assets.

Economists say the central bank has started borrowing dollars deposited in Turkish banks by companies and residents, a strategy that will likely end badly.

D.H