The 1st of January is the time that Turkey increases prices. But the current and planned financial situation could be tough for some Ex-pats.
The 1st of January is traditionally the time when the Turkish National Government, Local Government, retailers and suppliers increase their prices. But what’s in store for us this year?
Well, first up are electricity price hikes. After 5 years of price stability the Government has announced it will be increasing the price for domestic users by 15% and business by 10%. No exact date has been announced for the increase to take effect but expect it early in January.
After that, national taxes. Car tax, fines, residence permits, property taxes and most other taxes will be increased by 7.2%.
Then local taxes will be increased. Council tax, business taxes, water charges and anything operated by the local authorities. Again expect inflationary increases at a minimum.
For the Ex-pat these increases are a triple whammy. Not only are prices rising faster than their UK pensions are increasing but interest rates on savings are reducing and the Turkish Lira is trading strongly to the British Pound (GBP) resulting in less Lira on conversion.
The exchange rate today was 2.34 YTL to the GBP, a tourist rate of 2.20 YTL to the GBP, around 20% less than it was around this time last year. These are rates that were last seen in 2003. In that period inflation has increased Turkish prices by around 50% whereas UK pensions have increased by less than 15%.
In the last few months interest rates on savings have also come down and a typical saver can now expect around 14% net of tax per year. The Turkish Central Bank has more reductions planned for 2008.
If the strong Lira, inflationary price increases and reduced saving rates continue Turkey could find that not only European retirees are looking elsewhere for better value, but also the much-valued tourists.
Maybe the publicised plan to reduce interest rates over the next year will see the value of the Turkish Lira slide as demand for the currency declines, but for the pensioners and LOTI’s (people ‘Living Off the Interest’) out there, the financial future may not be so bright.