Published On: Sat, Nov 17th, 2018

Experts say Turkey’s exporters seriously losing due to exchange rate volatility

Experts say Turkey’s exporters seriously losing due to exchange rate volatility

As is known Turkey’s economy has had to cope with volatility of Turkish lira against other currencies for quite a while. Economy experts note that said ups and downs of TL against dollar and euro in particular cause exporters to lose money. They also emphasize if TL keeps losing more value against dollar and goes below 5.40 levels this could be a considerable blow for many companies.

The reason is many exporters signed contracts at the time, “taking into consideration the US dollar was on an upward trend” against the Turkish lira and calculated their costs and prices accordingly. Thus if their revenues in TL (when they change dollars into Turkish currency) turn out to be less than the amount calculated at the time, this could certainly be a loss situation based on their cost calculations in TL, earlier.

To provide an example, let us take an exporter for instance and imagine this company has bought raw materials when Euro / Turkish lira parity was at 7.50. Thus, said exporter calculates a price considering his raw material cost is 7.50 at the time. But when he sells his product today (or receives his money) when Euro/TL is 6.09 there happens to be a big difference of TL 1.41 which is recorded as loss for the exporter.

Therefore the experts also note that the administration needs to keep a good eye on exporters during this time, in particular and provide every possible support needed such as controlling serious cost increases in electricity and natural gas supplied to said sector.

In fact one of the current challenges for instance is that those businesses working with long-term contracts/agreements are affected by the exchange rate and that checks on their hands are affected by the falling exchange rate. Actually experts also point out that several incentives have been announced by the government. They also emphasize however that a lot of bureaucracy is in question and these measures should be facilitated to be productive for the economy.

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