A loss in purchasing power—even among high-income consumers and large firms—is expected for next year in Turkey. Meanwhile, operational costs and margin erosion are possible for MNCs and their partners. 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 amid Turkey lira volatility.


The Turkish lira lost approximately 18% of its value against the US dollar and 16% against the euro between August and October 2021. The central bank’s decisions to cut the benchmark interest rate during its September and October monetary policy committee meetings and provide a negative real interest rate have been detrimental to the outlook for the Turkish lira. Additional political tensions have ensued, with 11 Western countries making a statement regarding Osman Kavala’s case in Turkey, followed by President Erdogan declaring their ambassadors “persona non grata,” causing fresh lows in the lira’s value.

Our View

The Turkish lira will likely depreciate further, approximately 20% on annual average in 2022, bringing the lira in line with our forecasted downside scenario for next year. The lira may appreciate slightly into November, but it will face new volatility risks in 2022. Combined with additional cost pressures, such as rising oil prices and high shipping and logistics costs, the distortion in inflation expectations is likely to fuel further inflation into 2022. 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.

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