Turkey, known as a popular destination for tourists, is famous for its diverse sets of oriental and European elements- from its traditional Turkish tea, sweet treats like Baklava and Turkish delights to the majestic Hagia Sophia and the home to some spectacular beaches as the land borders both the Mediterranean Sea and the Black Sea.

Do you know?

In recent years, Bilateral India-Turkey trade increased significantly to reach US$ 7.84 billion in 2018-19 & US$ 7.08 billion in 2019-20. Despite the Covid pandemic, the trade between India & Turkey was US$ 5.42 billion in 2020-21. Major exports from India to Turkey include- petroleum products, man-made yarn, organic chemicals, dyes, auto components/parts, fabrics, made ups, plastic raw materials, industrial machinery, aircraft & spacecraft parts, etc. and major imports from Turkey includes Imports from Turkey include- industrial machinery, inorganic chemicals, broken/unbroken poppy seeds; machinery and mechanical appliances, pearls and precious/semi-precious stones and metals (including imitation jewellery), granite and marble, iron and steel articles, etc.

Several Indian companies such as Jindal, Indo-Rama, Birla Cellulose, TAFE, Mahindra, Sonalika, Tata, Polyplex Merrill Lynch, Punj Lloyd, Thermax, Wipro, Jain Irrigation, etc. are registered and invested in Turkey to the tune of US$ 125 million. According to Turkish data, the investments in India stands at US$ 223 million.

The detailed Trade between India-Turkey:

But what’s going on with its economy?

Even before the Covid pandemic and supply chain problems began beating the world’s economies nearly two years ago, Turkey was trying to move away from the recession as the country was facing huge debts, high inflation running at more than 21%, Unemployment rate at 21.9% and steep loss in the value of its currency- Lira, to become world’s worst performing currencies.

As noticed, this disaster has climbed up with savagely fierce intensity as the prices of daily consumer products are soaring. Current stocks being exhausted had led in shutting down the gas stations. Though, Turkey’s disaster has deep roots but its recent crisis was caused by the insistence of Recep Tayyip Erdogan, the President of Turkey. The country faced the latest currency crash post Erdogan’s speech two weeks ago outlining his decision to keep interest rates low to boost economic growth, exports and lending in the country under his new economic plan.

Erdogan said “I have never defended raising interest rates, I don’t now and will not defend it,” he told the reporters. “I will never compromise on this issue.”

Erdogan has been in power for more than 17 years and has argued that high interest rates will cause inflation opposite to what economists generally say that the inflation will lower down with high interest rates. As on 20th December, 2021, Lira crashed/devalued to a record low of 16.76 against USD, 19.40 against EURO and 22.80 against GBP resulting in expensive fuel, imports and daily products.

The reduction in the rates has raised concerns over the Central Bank’s independence and has spooked Foreign investors to dump Turkish assets due devaluation of currency.

Investors, economists and bankers normally look at the Central Bank of the Republic of Turkey to check inflation and set interest rates. But, Erdogan has already warned that if they won’t do what he wants, he will get them fired. While three officials have already been fired in two years.

Erdogan in an interview on State TV said, "With the new economic model, we reject out of hand the policy of attracting hot money with high interest rates and we will support Productions and Exports with lower rates. We are no longer posting a current account deficit and financing deficit with external debt, but we are moving towards an economy that gains foreign currency,"

Meanwhile, Turkey’s Foreign Trade Indices as on October, 2021 and prior to Erdogan’s speech shows the country’s Exports surged 20.1% to record high of US$ 20.79 billion as compared to October, 2020 amid global recovery from Covid Pandemic and the devaluation of Lira. For manufactured products sales grew at 20.3%, mining and quarrying products at 19.9% and agricultural products at 12.5%. On the other hand, there was a decrease in imports as compared to previous year and as on October, 2021 stood at US$ 22.23 billion resulting Balance of Trade to be US$ -1.44 billion.

Turkey’s other Economic indicators shows the impact of devaluation of Lira and recent reduction of interest rate as per the table below:

Erdogan in his New Year message- “Turkey has started a historic transformation in the economy by launching a process of growth in the country on the basis of investment, employment, production, exporting and current account surplus.”

References:

https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Statistics/Balance+of+Payments+and+Related+Statistics/Balance+of+Payments+Statisticss/

https://data.tuik.gov.tr/Bulten/Index?p=T%C3%BCketici-Fiyat-Endeksi-Kas%C4%B1m-2021-37389&dil=1

https://data.tuik.gov.tr/Search/Search?text=export

https://data.tuik.gov.tr/Bulten/Index?p=Foreign-Trade-Indices-October-2021-37403

https://tradingeconomics.com/turkey/exports

https://www.cnbc.com/2021/12/17/turkeys-currency-crisis-deepens-after-erdogans-latest-rate-cut.html

https://indianexpress.com/article/explained/turkey-economy-lira-inflation-erdogan-7674039/

https://indianexpress.com/article/explained/turkey-currency-crashing-us-dollar-turkish-lira-7658461/

https://indianexpress.com/article/world/turkey-erdogan-inflation-lira-7650386/

https://tradingeconomics.com/turkey/indicators

https://www.indembassyankara.gov.in/page/relation/

https://tradestat.commerce.gov.in/eidb/iecnt.asp

https://www.bloomberg.com/news/articles/2021-12-19/turkey-s-erdogan-says-islam-demands-lower-rates-and-so-does-he

https://www.haaretz.com/middle-east-news/turkey-erdogan-survive-horrifying-lira-crash-dollar-inflation-1.10471802