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Turkey’s Economic Crisis Batters Retailers, Boosts Apparel Exports

Two Turkish women shopping at the Dior boutique in Zorlu shopping mall in Istanbul, Turkey | Source: Getty Images
Two Turkish women shopping at the Dior boutique in Zorlu shopping mall in Istanbul, Turkey. (Getty Images)

The country’s currency, the lira, has lost almost half its value against the dollar so far this year, and inflation is rising precipitously. Analysts say Turkish President Recep Tayyip Erdogan’s unorthodox economic policies are causing the growing economic crisis, which is impacting both the fashion retail and manufacturing sectors.

The President is pushing an agenda of lower interest rates that he says will boost exports and cause inflation to come down. Turkey’s central bank cut interest rates to 15 percent on Nov. 18, its third rate cut since September that came despite inflation running near 20 percent in October.

The first half of that equation seems to be bearing some fruit, with data from the Turkish Statistical Institute released last week showing in the January to October period, Turkey exported apparel worth $15.12 billion, representing a rise of 25.72 percent year-on-year.

Among them, however, manufacturers importing materials for production are not so lucky. The same data set for the period showed the total cost of Turkey’s imports of cotton, cotton yarn and cotton textiles increased substantially to $2.83 billion, up 34.9 per cent year-on-year.

Given these complicating factors, it is not yet clear whether the economic crisis has created a net gain for most exporters in the country. Turkey, which is already a major sourcing market in the global fashion industry’s supply chain, has been a beneficiary of brands’ nearshoring efforts over the course of the pandemic period as some players moved parts of their East and South Asia-based production closer to Europe.

Fashion retailers in the country are also feeling the pinch. With inflation impacting the price of essential items (annual consumer price inflation in Turkey hit 21.31 percent in November, government data released last Friday revealed) and the value of people’s savings hit by a currency in freefall, there is less disposable income for categories such as apparel and footwear for much of the country. Consumer confidence is down, according to the Turkish Statistical Institute, with the index falling to 71.1 in November from 76.8 in October.

A recent survey by Turkey’s United Brands Association, which represents 384 brands and 70,000 domestic stores, showed that more than 50 percent of those surveyed reported sales have dropped by more than half compared with last year, a particularly unflattering comparison given that retailers were already hit hard in 2020 by pandemic-induced lockdowns.

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