Turkey will get through its economic travails, top executive tells NYT

Turkey will endure its latest bout of economic troubles, a top industry executive told the New York Times.

While Turkey braces for another currency crisis, Hakan Bulgurlu, chief executive of the country’s leading appliance-maker Arçelik, said he believes the country is prepared for the worst, the New York Times reported on Thursday.

“I’m a believer in Turkey,” he said in an interview. “Turkey always seems to get through these things on a knife’s edge.”

The Turkish lira sank to a record low of 7.41 per dollar this week, extending losses this year to almost 20 percent. Consumer confidence has fallen to record lows during the COVID-19 pandemic, which broke out in mid-March, despite government stimulus that has fuelled demand for loans and barred companies from laying off workers.

Bulgurlu said Arçelik has taken its own measures to minimise the effects of the economic downturn, including taking out insurance in financial markets against currency turbulence.

The company is also protected by its exports to neighbouring countries, he said. Arçelik, owned by Koç Holding, Turkey’s biggest industrial conglomerate, sells its washing machines and refrigerators abroad via the Beko brand.

“We’re doing business in Pakistan, in Bangladesh, in India, in Turkey, in South Africa,” said Bulgurlu, who is 48. “You get hardened. You learn how to deal with crises.”

Turkey last experienced financial turbulence in 2018, when the lira crashed to an all-time low. Now investors are concerned that the flood of cheap credit and low central bank interest rates, which stand at 8.25 percent compared with inflation of 11.8 percent, may send the economy off the rails.

The central bank has also depleted its foreign currency reserves defending the lira, meaning it lacks firepower unless it raises interest rates sharply, something it is loath to do because of stern opposition from President Recep Tayyip Erdoğan.

Despite the economic troubles – many Turks are struggling to cope financially due to rising prices – Bulgurlu says that Turkey has underlying strengths, such as its strong work ethic and a young population keen to consume.

Turkey’s future may hinge on whether Bulgurlu’s faith in the country’s resilience is justified, the New York Times said.

During past lira volatility, Turks could take comfort that a vibrant tourism industry would bring in much-needed hard currency to alleviate pressure on the lira. Not so this time around – the COVID-19 pandemic means revenue from foreign visitors this year will be a fraction of the record $34.9 billion of 2019.

“Everyone considers this year as lost and have their eyes on 2021,” said Ahmet Akbalık, owner of the Ela Quality Hotel in the resort of Antalya, according to the newspaper.

The cheaper lira makes Turkey’s exports more competitive in foreign markets, but supressed global demand due to COVID-19 is hurting the traditionally buoyant demand for Turkish goods. Meanwhile, low central bank interest rates are fuelling demand for imports, widening the current account deficit.

As it runs out of foreign currency, the central bank has begun borrowing dollars deposited in Turkish banks by consumers and businesses, a strategy that some economists say is likely to end badly.  

“This is a train wreck in slow motion,” said Uğur Gürses, a former central banker who writes about the Turkish economy.