It’s not just the holiday maker who will feel the cost but also business and ex-pats.
The ruling by the Turkish Constitutional Court last week not to ban the ruling AK Party Government has sent the Turkish Lira to a new high against world currencies. International investors, who were holding back investments until the court case closed, have now stormed back into the currency taking the Turkish Lira near to its 52 week high of 2.24 YTL to the GBP (£). The Turkish Lira stood at 2.25YTL to the £ yesterday on the wholesale markets and around 1.97 YTL to the £ at tourist rates.
The new found strength will be great for Turks travelling abroad or buying goods to import. However, for others the situation isn’t so good.
Firstly, the holiday makers visiting Turkey will find their holiday spending money won’t go so far. With the average beer costing 4.00YTL (£2.03), a can of coke at 2.00 YTL (£1), petrol at 3.50YTL (£1.78 per Litre), the average meal out at around 25 YTL per person (£12.70) and dolmus fares climbing all the time the cost conscious holiday maker who came on a B&B deal may wonder what’s going on with prices. Those that chose the ‘all-inclusive’ option will no doubt be counting their blessings. Add to that the increasing cost of flights and the cheap holiday in the sun may not seem so cheap after all.
Next the Turkish economy will suffer. Exports will be too expensive for foreign buyers so businesses relying on such trade will need to change markets or suffer the financial consequences.
The retired ex-pat receiving a monthly pension in £’s is also a victim. Last year, for a time, it was possible to get 2.70 YTL for each £. So a £500 monthly pension payment would have bought 1,350 YTL. However, at today’s rate that same £500 would only buy £985 YTL – 365 YTL less (a whopping 37% reduction). Add to that annual inflation in excess of 10% and the once strong buying power of the British ex-pat is being seriously eroded. This reduced spending power filters through the local and national economy as spending at bars, markets and shops is reduced in an effort to make ends meet.
So what of the future? Will we see the Lira continue to strengthen? Well there may be some glimmer of hope on the horizon. The Turkish Government is seriously over drawn on their bank account and is still in need of help from the International Monetary Fund. Turkey is also one of the big losers with regards the meteoric rise in oil prices as it must import all it needs and pay the price and this will increase their over draft. Some international banks are also reducing their lending to Turkey, in the wake of the credit crunch, and this in turn may weaken the Lira.
But all this seems too far away for those suffering the financial impacts of the strong Turkish Lira right now.