Turkey prosperity dream turns into economic nightmare

Erdogan’s economic bubble starts to burst

Retired nurse Ayse says she can only afford to look at the shops lining Istanbul's busy shopping street, a colourful mix of high-street brands, bustling cafes and bazaars.
"I am here for window shopping only. I can't spend my money on beauty products, haircuts or vacations," the 44-year-old said as she strolled among the crowds on Istiklal Avenue.
"I have two daughters in high school and I have to save money for their future. And the future looks bleak," she said pensively. "Our money is running out and we have no trust in the government anymore."
After more than a decade of stellar growth, job creation and rising prosperity, Turks say they are starting to feel the pinch as political tensions over a high-level corruption scandal have sent the local currency into freefall.
Memories of the financial meltdown of 2000-2001, which saw Turkey seek massive help from the IMF as stocks crashed and interest rates soared to dizzying rates around 3,000 percent, are returning to haunt the streets of Turkey's largest city.
"I have several friends who were forced to close down their businesses after the (2001) crisis. Their families have been shattered and some even committed suicide because of their debts," said tobacco kiosk owner Ahmet Yilmaz.
"I fear it could happen again. Because the atmosphere is pretty much the same."
His fears were echoed by others working in a bazaar near Istanbul's main Taksim Square, the epicentre of the massive street demonstrations in June that saw hundreds of thousands of people nationwide rise up against the embattled government of Prime Minister Recep Tayyip Erdogan.
"We saw this years ago. Whenever the dollar rises in Turkey, our businesses suffer. Our sales have decreased 70 percent since December 17," said Oncel Kalkan, the owner of a small shoe store in the Aleppo bazaar, before closing up early because of a lack of trade.
"There were some periods we didn't sell anything for three days in a row."
December 17 is now etched in Turkey's political conciousness as the date when police launched sweeping anti-graft raids, detaining dozens of people, business leaders and cabinet ministers' sons among them, and igniting a political firestorm that has shaken Erdogan's government to its core.
"We have been going through hard times for a long while. Sales have been going down for a few months," said jewellery store worker Maril Akdemir.
"None of us have reached end-of-the-year goals. I think there has been an untold economic crisis," she said before switching into fluent Arabic to entice some Arab customers into buying.
The lira lost over four percent last week alone despite aggressive central bank intervention, hitting record lows for 10 straight days, and casting doubt on the government's economic goals as it gears up for a key election period starting with local polls in March.
It closed on Friday at around 2.34 to the dollar and 3.20 to the euro, declines of around 20 percent over a year.
Deputy Prime Minister Ali Babacan sought to reassure investors about the health of the economy as he addressed the global business elite at the World Economic Forum in Davos on Friday.
He described the lira's slide as temporary, insisting: "Those who put trust in Turkey's long term accomplishments and stability will not regret it."
Although the tourists coming to Turkey now have more liras to spend, shopkeepers say they are not seeing the benefits yet.
"It would have made a positive effect if it was summer, when lots of tourists come here. But it is dead season anyway," said Mustafa Coban, who works at a carpet shop on Istiklal.
"There has been some nervousness after the rise of the dollar. Nobody knows where to invest. People are letting go of their opportunities," added jewellery shop owner Ahmet Argin.
Turkey is one of the top 10 tourist destinations in the world, attracting nearly 32 million tourists in 2013. The sector generated about 30 billion dollars in 2012, or about four percent of GDP, but it remains vulnerable to unrest or political crises.
"The number of tourists has declined since the protests. We have had very bad days since last summer," Argin said of the June turmoil.
Nevertheless, tourists say they are happy with the extra liras in their wallets.
"I feel richer. It is good for my pocket. I get more value for my money and I bought more than I intended. I bought carpets and spent more for friends," said Ludwig Van Graan, a South African teacher who lives in Saudi Arabia.
But the currency's sharp decline is hitting others hard.
"I have just bought dollars but I have losses because I am going to send it (to relatives) abroad. It affects me, because I am paid in lira," Ivana Pullukcu said outside an exchange office in Istanbul's upmarket Nisantasi district.
One employee at Cetin Exchange Office on Istiklal said: "Nobody is buying dollars anymore. It is good for foreign tourists but not for us because we have more Turkish customers than tourists when it is low season."
Concerns over the economy are compounding the anger over the corruption scandal and the government's harsh crackdown on protesters.
"In this country, everything is controlled by one man," said an environmental activist who gave her name as Yildiz Yildiz.
"This is a regime in which thieves and fascists are untouchable, but those who protest against it are beaten and gassed," she said.