Persistently high inflation under the policies of President Recep Tayyip Erdogan is decimating the Turkish tourism industry, as both foreign visitors and locals decide to save money by nipping over to Greece for holiday getaways.
“Angry citizens have taken to social media to share their bills, including the equivalent of $640 for food and drinks for five people in Bodrum and $30 for five scoops of ice cream in Cesme,” Fortune reported Monday.
Grumpy Turks said the quality of service at hotels and restaurants is declining even as the prices skyrocket. Some accused Turkish businesses of using notoriously high inflation as an excuse to push their prices even higher.
The disgruntled tourists of Turkey could not help noticing that the tantalizing Greek islands have lower prices and better service and, thanks to Turkey’s efforts to mend diplomatic fences with Greece, a fast-track visa program between the two countries was launched in March. Turkish citizens can now visit the beautiful and affordable Aegean islands with an easy-to-obtain temporary visa.
Both Turkish and Greek officials knew tourism to Greece would benefit from the visa program, but they underestimated how much it would improve as Turkish inflation soared. Turkish travel agents told Fortune that tourism to Greece has nearly quadrupled over the past year. Greece is thinking about pumping the brakes a little because the Aegean is beginning to resemble a parking lot for cruise ships.
“With interest rates at 50% and inflation above 70%, people are in shock. We’re all getting poorer,” an unhappy Turkish restaurant owner told Fortune.
Kivanc Meric, chair of the Izmir Regional Representative Board of the Association of Turkish Travel Agencies (TURSAB), told Euronews Travel on Monday the problem was exacerbated when “the Turkish government took steps to suppress foreign currency.”
“This has led to the overvaluation of the Turkish lira in this inflationary environment. Therefore, in the domestic market, our citizens have the chance to go abroad at a lower cost. At home, the price of hotels remains high,” Meric said.
“I have to say that there is a serious problem in Turkey’s foreign tourist numbers as well,” he added. “While Turkey was in a leading position in Europe, especially in the Mediterranean basin, with its service and hotel quality, it has lost this position due to its price disadvantage.”
Turkey’s Daily Sabah optimistically countered on Tuesday that tourist spending in Turkey more than doubled during the first quarter of 2024.
“The strong tourism data came despite soaring costs amid stubbornly high inflation, which currently runs at slightly above 70% and is estimated to continue falling in the upcoming months after entering long-awaited disinflation in June,” the article gushed.
The Daily Sabah portrayed the data as a strong rebound from the doldrums of the Wuhan coronavirus pandemic:
In the first quarter, the largest share of total travel expenditures went to food and beverages, at 33.3%; transportation, at 28.8%; and accommodation, at 10.9%. According to the rate of change of trip expenditures compared to the same quarter of the previous year, it was observed that there were increases of 91.4% in eating and drinking expenditures, 80.8% in transportation expenditures and 127.3% in accommodation expenditures.
Foreign arrivals hit a record 49.2 million in 2023, up from 44.6 million tourists who arrived in 2022, with trips from Russia and Europe, driven by Germany, spearheading the increase. Combined with nearly 7.5 million Turkish citizens living abroad, the figure stood at 56.7 million.
Tourism income climbed to an all-time high of $54.32 billion, compared to $46.48 billion in 2022.
CNBC noted last week that while inflation has been crushing for working-class Turks, and vexing for foreign visitors, Erdogan’s economy has delivered a remarkable 157-percent increase in wealth over the past year for those who own assets such as real estate.
“If inflation is very high, what tends to happen is that if you have a real asset like housing, the house prices tend to rise in line with inflation, if not even faster. So those people with have homeownership, or who have equities, which also tend to perform fairly well in those environments, they tend to see their wealth accumulate a bit faster,” explained UBS Global Wealth Management economist Samuel Adams.
“Of course, it doesn’t mean that everybody benefits to the same extent. If you’re not in those assets, if your wage rises don’t keep pace with inflation, then, of course, it will be fairly negatively affected,” he added.
UBS chief economist Paul Donovan noted that being “asset-rich” may not be much of a comfort for “cash-poor” Turkish citizens struggling to feed their families.
“A lot of the stresses that have arisen in the Turkish economy over the last few years have come about because of negative real income, not necessarily what’s happening on the asset side,” Donovan said.
Bloomberg News reported in June that Erdogan’s policies were arguably successful at lifting millions of his citizens out of poverty over the past two decades, but now high inflation is clubbing their standard of living back down. Foreign investors are eager to buy into the asset-rich economy Erdogan created, while working people put in long hours just to afford groceries.
“We are the ones forced to swallow the bitter pill. I am not buying the lies about the so-called turnaround in the economy. I don’t feel it in any way. Maybe foreign investors do,” grumbled 54-year-old secretary Elif Bulut, who got to retire early thanks to one of Erdogan’s madcap vote-buying giveaway programs during his frantic re-election campaign, only to discover she had to return to work and put in ten-hour days to afford food.
A big part of the problem is that Erdogan went wild with spending binges and loose monetary policy to win re-election but then installed more sober economic management once his two-decade grip on power was secure.
The central bank raised loan and credit card rates, pulling the rug out from under working-class Turks. Spending cuts and tax increases could be next on the fiscal reform menu. Erdogan usually mutes public discontent with rising costs of living by raising the minimum wage, but in the current Turkish economic environment, the effects of minimum-wage hikes disappear in a matter of months.
Politico Europe predicted in June that the “end of Erdoganomics” is at hand. The authoritarian Turkish president is gambling heavily on a big economic turnaround in the fourth quarter, with promises that inflation will sink to single digits.
“Some friends should not make the mistake of thinking whether the president is going through a big change in interest rate policies. I am the same here. We have worked with a low interest rate, low inflation theory. I still work with the same understanding,” Erdogan insisted when asked if his new economics team represented a reversal of his weird economic theories, which are partly based on Islamic laws that treat loaning money with interest as usury.
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