The Turkish lira lost approximately 18% of its value against the US dollar and 16% against the euro between August and October 2021. A further 15–20% depreciation is expected for next year despite some potential stabilization in the coming weeks. Combined with additional cost pressures, such as rising oil prices and high shipping and logistics costs, the distortion in inflation expectations will likely fuel further inflation into 2022.

Companies need to align on cost assumptions, look for further operational efficiencies, and support price hikes with marketing and value investments, as well as update their product portfolios. Maintaining scenarios for 2022 will be critical, as key risks exist regarding potential early elections, tensions with Western countries, and a volatile global cost environment amid upcoming US Federal Reserve interest rate hikes.

Our View

The Turkish lira lost approximately 18% of its value against the US dollar and 16% against the euro between August and October 2021.

The Turkish lira will likely depreciate a further 15–20% on annual average in 2022, bringing the lira in line with our previous downside scenario for next year. The lira may appreciate slightly into November, but it will face new volatility risks in 2022. Therefore, we have added new downside ranges to our forecast, and updated our forecasts for the economy.

Additional cost pressures and distortion of inflation expectations will also ensure high inflation in 2022. A loss in purchasing power even among high-income consumers and large firms is expected for next year.

Suggested Actions

  • Support price revisions with marketing investments, new product launches, and value-added services, as demand will ease.
  • Ensure alignment over long-term Turkey strategy across partners and HQ and revise 2022 budgets.
  • Continue to improve supply chain resilience and inventory management; look for ways to further streamline OPEX and minimize margin loss across the customer chain.

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