When you look at the impact that Brexit has had on the UK, one aspect that can be genuinely quantified is the manner in which the loss in value of the pound has seen the UK tourist industry boom.
Visitors have been able to see their hard-earned cash go far further than it previously would, and has even seen hotels previously deemed too expensive for the Average Joe to stay in become more affordable. UK residents have also, in some cases, opted to book staycations as their money can’t go as far anymore.
In stark contrast to this, Turkey has seen the value of the Lira plunge in recent times, with the Lira hitting a record low against the likes of the dollar and the euro, causing the Turkish economy to experience a wobble compared to the growth currently being experienced in other so-called “emerging” markets. Perhaps more frustratingly, this has had an influence on tourism in Turkey; sectors like the cruise industry have taken a hit in 2017, with only 307 ships landing this year, compared to 537 ships in total at the same time in 2016.
Is It All Doom and Gloom?
Tourism is under pressure in the country due to issues that are wider than just the currency slide hitting Turkey. Some seem to be untimely, like the issues regarding US visas for Turkish citizens, as well as decisions to ban certain events – which, while perhaps not causing controversy locally, risk creating a perception of Turkey as a place that is not overly welcoming to people from a range of diverse lifestyles. These changes seem to suggest that there could be a wider crisis about to impact on the Turkish tourist economy quite fundamentally. However the facts suggest that this isn’t the case.
Indeed, the most recent evidence seems to suggest that the great exodus of tourists seems to finally be over and that the numbers are back on the rise, with headline figures showing that tourist numbers are up 18% compared to 2015. This sector isn’t the only one that is important for the Turkish economy, but this return to better times suggests that the country could well be benefiting from the pressures that the Lira is under. This situation is also being helped by more stability due to less political volatility in the country and the wider region, with this sort of stability typically helping to sure up the underlying factors of an economy.
An Over-reliance on the Foreign World?
Perhaps, though, the best way to see if Turkey’s finances, and therefore the value of the Lira, are truly on the road to being settled is to look at the issues that are faced by the country’s reliance on the foreign world. In the case of Turkey, this is arguably a two-fold issue. On the one hand, the country wants to be a leader in the tourism industry to make the most of the incredible beaches and resorts that have made places like Bodrum, Dalyan and many other locations the envy of many countries worldwide.
On the other hand, though, Turkey relies on other countries in some ways that are far more volatile. Its reliance on foreign money to help it continue to borrow money to invest in the economy is also significant. This financial reliance is of course a complicated state of affairs but essentially boils down to the fact that the country is negating the gains it makes on exports from a lower Lira because of the fact it is losing money due to the value of the Lira when it imports to the country. In response to this, the Lira needs to continue to fall in order to help make exports more profitable and to sustain the 18% growth that Turkey saw in the third quarter of 2017.
Time to Speculate?
While the economic foundations seem secure, the ironing out of the currency value in Turkey presents a situation where investors could well find some success. Indeed, if you look at the world of currency speculation, normally you’ll be looking at forex movements of five decimal points when it comes to making money or speculating on newer currency like bitcoin, which has grown hugely in value in the past year, and in this context, the Turkish Lira looks to be a more assured currency to speculate on. The Turkish Lira was originally introduced as a gold coin in 1844, and because we are now dealing with the new Turkish Lira after the currency was re-issued between 2005 and 2008, debate still rages about how to improve the currency, with some speculating gold is the way to do this. This highlights how forex is a complicated market to enter and you need to be aware that educating yourself in the nuances of the way in which factors like increased political risk or a change in the outlook of an economy can have huge impacts on currency value.
Perhaps the most interesting thing right now about the Turkish Lira is that political shocks look very unlikely and the improving political situation in the area as a whole helps to explain why Bloomberg view the currency as likely to head in only one direction, making this a far easier option to speculate on than a highly volatile currency like the South African Rand, which has been exposed to many more shocks and has now been labelled the most volatile currency in the world, with only bitcoin likely to rival it.
A Lower Currency, a Better Return for Tourists
There is a strong chance that a continued lowering in the value of the Lira could well be a continued bonus to the recovering tourist industry. With the outlook continuing to look brighter in this area, the economy looking stable and new developments in travel to the country helping to showcase that Turkey is a country ready to thrive again, the future of the currency could well be a huge help to a country that has a fantastic chance to rebuild itself as one of the world’s very top tourist destinations.
