Impact of Russia’s Invasion of Ukraine on Turkey’s Economy

As Russia’s invasion of Ukraine continues, its impact is being felt far beyond Ukraine’s borders. In Turkey, the war has cast a shadow over President Erdogan’s economic ambitions, leading to a significant impact on the country’s trade deficit.

Rising Trade Deficit and Commodity Prices

Turkey’s trade deficit has significantly increased over the last seven months, largely due to rising commodity prices. In July, the monthly trade deficit reached almost 11 billion dollars, a record level. The imbalance between imports and exports from January through July was 144% more than the previous year, according to Turkey’s state statistics agency.

Depreciation of the Lira

Adding to Turkey’s economic challenges is the rapid depreciation of the lira. As a result, the country’s problems do not seem to be ending anytime soon.

Interview with Adel Yarchin

Adel Yarchin, a professor of international economics at Constance University of Applied Sciences, shed light on the situation in Turkey. He discussed the impact of imports and exports on the country’s widening trade deficit and the role of President Erdogan’s economic policies.

Unconventional Monetary Policy

Yarchin emphasized that while global factors, such as rising oil and gas prices, contribute to increasing import volumes, Turkey’s domestic economic and monetary policies also play a significant role in widening the trade deficit. He highlighted the wrong and unpredictable policies that have made the Turkish lira the weakest currency in the world.

Policy Changes in Turkey

When asked about any potential changes in policy from the leadership in Turkey, Yarchin expressed pessimism. He stated that the government has shown no signs of improving the shaking economy and has even announced its intention to continue dropping interest rates. This goes against global trends and has LED to growing uncertainty in the country.

Future Economic Outlook

Yarchin concluded by warning that Turkey is sailing towards a currency crisis and a larger economic crisis if the current policies continue. He highlighted the reluctance of investors to enter the country and the need for a more stable and predictable economic environment.

Yarchin’s insights shed light on the challenges facing Turkey’s economy in the wake of Russia’s invasion of Ukraine and the need for decisive and prudent economic policies to steer the country towards stability.

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