The other day a business person asked me whether he should buy dollar. I said as a joke, “Haven’t you bought it yet?” Instantly, his face turned pale white. Realizing that he might pass out or something, I told him that it was only a joke.
But, he seemed hardly convinced for some reason. So, I grabbed my laptop and showed him a graphic chart on USd/TRY’s performance during the period of 1990-2019 which resembled to a rocket traveling almost horizontally with a 45 degree angle as far as possible before gravity brings it back to Earth. In other words, Turkey is sadly destined to face a stable decline in Turkish lira. And so far, nothing useful was done to change it.
First of all, more 85% of Turkish imports consist of raw materials, intermediate goods and investment goods which means it’s only a matter of time that we’ll import air too to help us breathe as a nation. Now, we’re importing wheat and sugar too! Sadly, Turkey’s import dependence hits record highs. Our export performance is getting weaker while imports keep growing at high rates with the recent increase in GDP growth.
Turkish private sector still has a debt pile of more than 200 billion USD. And I haven’t mentioned banks and financial institutions yet. We are exposed to a total foreign exchange risk of a half-trillion dollar. There is huge gap between Turkey’s total foreign currency assets and its liabilities.
“Home produced goods indexed by FX rates…”
Even the price of 100% home-made intermediate goods is indexed by FX rates. The other day, an opinion leader let slip on television, “We had to lower our prices because raw materials prices are down” which shows that they don’t add too much of a value to their products.
Recently, another opinion leader was bragging over the phone about selling goods to Europe for less than 10 euros, which means Turkish businesses fail to add value to their goods and services.
Do you think industrialists are the only ones ignoring the importance of adding value to products and services? From real estate to automotive, hotels to musical instrument, the price of each and every one of these items is exposed to FX rates. Similarly, landlords prefer rent in foreign currency. So, what can help lower FX rates in this country which is extremely sensitive to FX fluctuations? The answer is simple.
Improving justice, individual liberties and the quality of education while helping people become self-sufficient in accordance with their own skills and capabilities. However, in Turkey, no one seems to sustain themselves as Turkish politics are designed to make Turkish citizens dependent on others.
Now, which one do you suppose is normal for FX rates in Turkey? Falling or rising? If you have the right answer to this question then I’m sure you won’t have difficulty answering this one: “Will FX rates go up any further?”