As Turkey's currency drops, some worry the government can't turn things around
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In Turkey, concerns are growing over the state of the economy and the response by the country's president. The Turkish lira has plunged to record lows, having lost more than 40% of its value so far this year, and prices are rising. NPR's Peter Kenyon has been speaking to people in Istanbul who say they don't know if the government can turn things around.
PETER KENYON, BYLINE: In the latest negative indicator, Turkey's finance minister quit, causing some to wonder if he left because he was about to be fired. President Recep Tayyip Erdogan had already sacked a string of finance and banking officials well before the Turkish lira hit an all-time low of nearly 14 to the U.S. dollar recently. That caused prices to go up. Istanbul shop owners and managers say the price hikes are by now familiar but no less painful.
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KENYON: As butcher Sevket Yildirm saws a leg of lamb into chunks for a customer's soup pot, he says every time the rates get cut, customers stop showing up.
SEVKET YILDIRM: (Through interpreter) Yes, business is bad. If there used to be 20 people coming in, now maybe it's 10. It's the cost. Ground meat used to be 75 lira. Now it's 90. I expect it to go over 100 by early next year.
KENYON: Most economists will tell you that if you want to fight inflation, raising interest rates is usually a good place to start. Erdogan, however, believes that's a myth created by a group he calls the interest rate lobby. He believes the opposite, that reducing interest rates is the path to lower prices. In a speech to his ruling party members, Erdogan said he knows he's taking a big risk, but he believes it will pay off.
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PRESIDENT RECEP TAYYIP ERDOGAN: (Through interpreter) Politically this may be the riskiest plan, but it's also the right plan for the sake of our nation. Instead of raising interest rates and making the parasites happy, we are cutting rates and making investment and production easier.
KENYON: Turkey's economy is growing overall and in relatively good shape. The news is much worse, for instance, in Lebanon these days. But Irem, a chef who runs a bakery and cafe in Istanbul, says the rising prices are bad enough. But what really irritates her is the volatility, which makes it hard to plan ahead.
IREM: First of all, you need stable prices to drive business, and that's pretty impossible in Turkey. For a long-term plan, this kind of makes our job quite difficult.
KENYON: Hacer Foggo, who works with the Deep Poverty Network, which offers assistance to impoverished families, says she's very busy these days. Reached via WhatsApp, she says many of her clients are unable to pay for the basics.
HACER FOGGO: They don't have any food, or they don't pay the bills. You know, they don't electric. They don't drink clean water. They cannot buy. They are giving the babies sugar and water, for example, or some soup.
KENYON: The currency crisis has sparked speculation about what it could mean for President Erdogan's political future. Political scientist Gulfem Saydan Sanber wonders if Erdogan might come to regret having convinced voters in 2017 to abandon Turkey's parliamentary form of government in favor of a president with sweeping executive powers.
GULFEM SAYDAN SANBER: He promised the voters that everything would be fixed once we change the system. So they believed in him, and they vote yes, we change the system. Since then, everything got worse and worse.
KENYON: Erdogan has to call new elections by 2023, and analysts say that unless the economy rebounds sooner, he's likely to put them off as long as he can. Peter Kenyon, NPR News, Istanbul.
(SOUNDBITE OF RYUICHI SAKAMOTO'S "BIBO NO AOZORA") Transcript provided by NPR, Copyright NPR.