Turkey is facing a high rate of inflation. The nearly 20 per cent annual inflation rate is driven by food, services, housing and transportation prices, leaving consumers with little money for their clothing needs. So people are purchasing only the minimum necessary textiles for their daily needs. Decrease in domestic demand will impact manufacturing as textile-apparel companies will cut down on their production.
Accompanying high inflation is the weakening currency. Turkey’s currency lira has lost around 25 per cent of its value since the beginning of 2021. Meanwhile, in addition to the high cost of fuel and other imports, the government this month raised the price of natural gas supplied to the industry by 48 per cent, as a global price spike drove up import bills.
One of the largest gas importers in Europe, Turkey depends on pipeline gas from Russia, Azerbaijan and Iran as well as liquefied natural gas (LNG) imports from Nigeria, Algeria and spot markets. As a result of the current scenario, new investment in the country’s manufacturing sector, especially from domestic players, will fall drastically. Already, people have started shifting their savings to gold and foreign currencies. One major reason for the high rate of inflation and the weakening of the currency is the government’s insistence on low interest rates.