Often the reality of an economy can be found not in the facts and figures of GDP and tax rates, but simply by looking around. I spent some time earlier this year in Turkey in one of the countries biggest cities – Izmir. I was there long enough to get a feel for the place, and it’s troubles. On a global scale, Turkey seems to be doing well, many economic figures point to increasing prosperity, falling levels of Government debt and many other favorable economic indicators. Yet on a personal level, there are many issues and indeed similarities to European economies some years earlier.
The streets of Izmir are filled with expensive and new motor cars, Mercedes, Audi’s and BMWs are everywhere. These are expensive cars, particularly in Turkey where they are often cost much more than in European countries. The city is not unusual, and there is a huge impression of wealth and economic success on the streets of many big Turkish cities just like Izmir.
So how are Turks able to afford these expensive cars? If you check out the salaries on offer for jobs in local papers, you’ll become even more confused – these salaries are nowhere near the level to be able to afford these sorts of vehicles and lifestyles. In 2013, over 850,000 cars were sold, compared to less than 100,000 in 2002 – the Turkish automotive sector is experience a huge surge in demand. However here lies the clue, the vast majority of these cars are paid for using freely available personal credit. It’s the same with technology. walk down the street and you’ll notice the Turkish youth have all the latest gadgets and phones. They have the same appetite for technology that the youth have in other developed nations despite the efforts of the government at blocking and filtering internet access (details of workarounds here – www.dnsproxy.co.uk)
When I first visited Turkey in the 1990s it was very rare for a Turkish person to own even a single credit card, now most young Turkish people will have four or even five. Bank loans, cheap credit and marketing campaigns promoting luxury items are everywhere, it certainly has the feel of the pre-recession days of the UK and Europe. Personal debts levels in Turkey are growing at an alarming rate, the worry is that it is becoming unsustainable and outside money which helped to sustain this credit boom is becoming much more difficult to find.
It all sounds very familiar, and it is hoped that Turkey manages to control these level of debt without the huge problems the recession and austerity measures needed in most Western countries. The threats are mounting though, the levels of credit look certain to cause wide spread defaults, repayment terms and lengths are becoming longer encouraging even more debt. For many the lure of new technology and luxury items is too strong to resist especially among the young and aspirational. Traditional boundaries and customs are being eroded as more Turkish people move from villages towards the towns and cities. You would rarely find a computer in a Turkish household a decade ago, now they are as common place as Europe. Turkish people use and shop on the internet all the time, often using a DNS service to access sites in other countries that may be blocked by the country’s growing list of internet blocks.