K. Murat Yıldız / Duvar English
Turkey’s Consumer Confidence Index (TÜGE) fell sharply in August, according to the results of a consumer tendency survey conducted in collaboration with the Turkish Statistical Institute (TÜİK) and the Central Bank (TCMB). TÜGE fell from 79.5 points in July to 78.2 points in August with a 1.6 percent drop.
The Consumer Confidence data for the General Economic Situation Expectation Index for the next 12 months fell by about 10 points in August. Forest fires, floods, an accelerating influx of refugees, and the government's failures in crisis management have all contributed to a significant loss of faith in the future and increased pessimism in society according to experts and the opposition.
The household financial situation index in the current period, which was 57.9 in July compared to the previous 12-month period, increased by 5.8 percent to 61.3 in August, according to the TÜGE sub-indices. Meanwhile, the household financial situation expectation index for the next 12 months decreased by 1.4 percent to 78.6 in August from 79.8 in July.
Economic expectations plummet in August
Although the TÜGE and its sub-indices, which reflect economic expectations for the past and next 12 months, the state of households, their concerns and hopes regarding income and the economic course, rose slightly in June and July, they fell sharply in August.
In May 2020, consumer confidence fell to its lowest level ever, at 76.9 points. Despite that many other indicators have shown rapid recovery in the past, consumer confidence remains low.
The sharpest decline in sub-indices occurred in consumers' expectations for the country's general economic situation in the next year. This index, which dropped to 75.3 points, a decrease from 83.2 points in July, also brought consumer confidence down sharply in August.
The index of households’ current financial situation has been rapidly declining for a long time. While it was at its lowest point in history in July, it slightly increased in August. On the other hand, the household's financial outlook for the coming year has deteriorated.
Pessimism filled by government’s failure to respond to wild fires and floods
“I believe that the pessimism was fueled by the August forest fires, the floods that caused significant economic and human loss, the drought that wreaked havoc in many parts of the country, and the worries and concerns about the future caused by the accelerating Afghan refugee influx. These factors were effective in causing a shift in consumer confidence,” main opposition Republican People’s Party (CHP) Istanbul deputy Erdoğan Toprak told Duvar English.
Oğuz Demir, Associate Professor of Economy told Duvar English that, “The problems in the intervention and the inability to complete the necessary operation during the recent fires and floods may have contributed to the increasing lack of confidence,” and added that, “All negativity regarding the government's problem-solving ability also manifests in the economy.”
“In addition, rising inflation, high rate hikes in fuel, natural gas, and electricity in particular, food inflation approaching three times official inflation, and rising unemployment are all factors that are fueling fears and concerns about the coming year,” the deputy added.
Pointing at the rapid depreciation of the Turkish lira, Toprak said, “Households with low and fixed incomes, minimum wage earners, in particular, see that, while their income will not rise dramatically in the future, the worsening and aggravation of economic conditions will force them into a bottleneck, and they will not be able to get what they can get now with their current income in 3-6 months.”
No long-term plans to restore confidence
Experts point out that the picture of severe impoverishment in the largest segment of the population, described as the "middle pillar," consisting of small tradesmen, craftsmen, small and medium enterprises, minimum wage earners, salaried and working people, retirees and the unemployed, which constitutes the backbone of the economy, will become even more unbearable and unsustainable, according to the data revealed by TÜGE.
“We have become a society whose purchasing power is constantly eroding and whose income is being suffocated by rising prices. As a result, people are unable to look toward the present and future with confidence. Only by permanently lowering inflation and achieving significant growth with a fair share of it can this confidence be restored. This will necessitate a long-term commitment. Unfortunately, the government does not currently have the desire or ability to take such long-term steps,” Demir concluded.