Circular No.MR/CIR/ 1634 August 13, 2018
To: Members of the Council
Sub.: Economic Crisis in Turkey
The US and Turkey relations have nosedived to the lowest with US putting additional tariff on Turkey’s exports to US of around USD 2 billion. The US has also put embargo on loans to Turkey and warned of suspending its membership of NATO. Also, it has barred Turkey’s imports to and from Russia due to sanctions.
The mishandling of economic crises has led to Turkish Lira depreciating by almost 40% since January and 30% in last one month. 3.5TL to 1USD it’s now 6 to 1.
This has made importers jittery and many have suspended or delayed imports. This will continue for some more time as Turkey is unable to service its debts of USD 250 billion with Trade deficit of USD 110 billion.
Although, Turkey has very strong manufacturing base and its home consumption is growing. Being an importer of basic necessities like oil and gas it will be badly impacted.
Textiles Trade will take a temporary hit but exports being large part of its textile trade, it will recover after 2-3 months. But at this stage if things are not managed well economically, the severe economic crisis looms large over Turkey.
According to the Govt. of Turkey the largest challenge before the President is how to avert economic crisis. After Russia, it is only China that can help him and he has flown last night to Beijing. Russia fearing adverse action by US has refused to help besides it has its own problems. A task force is formed to tackle this emerging crisis that suggests the first step to curtail imports.
Indian companies need to be cautious as exports should be avoided without LC from reputed banks backed by Sabanchi and Koch family like AKBANK and YEPI CREDI. Some banks may go bankrupt. For next 2-3 months, there is risk in sending shipments on DP basis or on 30:70 basis as normally fabric trade with Turkey happens on 30:70 basis.
The above is for awareness. Members may kindly make a note of the above.