It would be optimistic to think that the troubles that will be caused Russia-Ukraine in the Turkish economy will be limited to just a few weeks.

TOURISM GOES OFF THE RAILS

Last year, 4.7 million tourists from Russia and 2.1 million from Ukraine came to Turkey. The share of Russian tourists in the total is 19%, while the share of Ukrainian tourists is 8%. The number of tourists coming from these countries was expected to increase this year. Under normal circumstances, one out of every three tourists could come from these countries this year. Now, that hope is completely lost. Even if this conflict ends soon, it would be optimistic to expect many tourists from Ukraine this year. In addition, if Turkey’s relations with Russia deteriorate and this country imposes a ban against Turkey as they did in 2016 after Turkey shot down a Russian jet in 2015, the tourism industry will suffer a huge blow. If this conflict reaches a level that makes Europe uneasy, the blow we will suffer will be much more severe.

EXCHANGE RATES UP, SO ARE ENERGY PRICES

The increase in the dollar rose above 5% at some point last week. We don’t have the ability to keep the dollar at the 13.50-13.60 level anymore. The total rate of increase in the dollar and oil, which approached 15%, will be reflected in fuel prices.

Natural gas prices have also increased. Although natural gas prices are not immediately reflected on citizens, it should not be ignored that the rate of increase in European markets reached 30% last week. Turkey now buys about 70% of its natural gas imports per the prices in the European markets, according daily DUNYA Energy Editor Mehmet Kara. Therefore, it will not be surprising if a new increase in natural gas prices will come after a while.

FOOD PRICES WILL INCREASE

We have become almost completely dependent on Russia and Ukraine for grain import, which totaled USD 3.8bn last year. 58% of this import was from Russia and 22% from Ukraine. The share of the two countries in Turkey’s total is exactly 80%. So, the price of all foodstuffs, especially cereals, will increase even more. Furthermore, we may have to import from farther away countries due to high prices in Russia and Ukraine.

FX-PROTECTED TRY DEPOSIT ACCOUNTS WEIGH ON THE TREASURY

Those who entered the FX-protected TRY deposit account system in the first days of the scheme will receive a difference of more than 15 points on top of the 4.25% interest rate projected for three months due to a 20% percent increase in exchange rates. This difference will be covered by the Treasury, which will find this money either from new taxes or deduction from other services.

PRICES WILL JUMP THE MARCH INFLATION

Price increases will be reflected in producer prices, which have been very high for a long time and reached 94% at the end of January. Production in Turkey will get more expensive. Some items will have a direct reflection on the consumer, in fuel primarily. Due to this increase, the prices of all goods and services will inevitably increase. I estimate the CPI increase for February as 5% with a plus-minus half-point margin.