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Turkey: It's best to spend your money today

The highest-value banknote in Turkey is now worth no more than 5 euros. The devaluation of the lira continues - prices in Erdogan's country are rising almost every day.

Dec 3, 2024 11:09 116

Many people in Turkey, especially the older ones, no longer call the national currency by its real name “lira“ , and they talk about a “million”. 20 years ago, Recep Tayyip Erdogan introduced the “new lira” – then six zeros were removed from the prices - so one million old liras became one new lira, and two new Turkish liras were approximately one euro, explains Raphael Geiger of “Süddeutsche Zeitung” (ZC).

The German publication recalls that Erdogan then promised the stability of the new Turkish currency, but managed to keep this promise for only a few years – while the Turkish economy was booming. However, the situation is different now.

„The economy is stagnating, the country's important car industry is producing less than before, inflation of around 50% is still too high, and the GDP created per capita is almost half that of Germany, commented “Frankfurter Allgemeine Zeitung“ (FAC). According to the publication, only tourism is developing favorably and brings large revenues.

The collapse of the pound

A year and a half after his re-election as president, the economy in Turkey continues to develop extremely unevenly, FAC also writes. “Süddeutsche Zeitung“ in turn, it offers comparisons that show how the devaluation of the national currency went in the country, where 200 lira is the largest Turkish banknote. If 20 years ago they were exchanged for 100 euros, and 10 years ago their value was still around 70 euros, today 200 new Turkish liras are worth just over five euros.

Twenty years after the currency reform, the Turkish economy is far from its best times. In October, the central bank measured inflation at 48.6%, which was really good news as it had not fallen this low in a long time.

Independent economists, however, estimate inflation at nearly 90 percent, and an unwritten rule in Turkey states that if you want to know how much something will be worth a year from now, you must multiply its current price by two. Although the pound has stabilized to some extent, the central bank recently revised its forecast for inflation next year and adjusted it upwards – according to financial analysts, this was a manifestation of a little more realism, wrote the Central Committee on this occasion.

Why should money be spent immediately?

However, high inflation rates cause great uncertainty among people. If a person is hesitating whether to buy an IKEA bookcase now, he can generally be sure that tomorrow, the day after, or at the latest in a week, it will cost more. So it turns out that

the best investment is certainly consumption - ie. the money to be spent immediately.

The lucky one is also the one who took a loan years ago, because now the installments pay off almost by themselves. Every self-insured person who has decided to deposit the due pension insurance for a few years back is also lucky. Today, the 2014 installments are worth next to nothing in pounds – for a whole year, they produce as many as five or six beers in an Istanbul pub today, writes “Süddeutsche Zeitung”.

The minimum wage is only enough for the rent

However, everyone who withdrew money years ago but did not spend it is at a disadvantage. And also people living on minimum wage. From January, it will be increased from 17,000 to 20,000 pounds, which is currently around 545 euros. However, this increase is unlikely to offset inflation. And according to the “Frankfurter Allgemeine Zeitung“ most leading economists in the country criticize the idea of the increase because it could further fuel inflation.

„Süddeutsche Zeitung“ he even talks about hyperinflation and the massive impoverishment of the population: “One million Turkish lira does not make you a millionaire, however, which you need to be to live well in Turkey, the German publication points out.