Under the combined influence of negative factors such as the COVID-19 epidemic, the Russia-Ukraine conflict, and rising global energy and food prices, countries around the world are facing huge inflationary pressure.
For example, in the United States, the world’s largest economy, the inflation rate in the United States has remained high in recent months. For this reason, the Federal Reserve has adopted a strategy of raising interest rates. However, raising interest rates not only failed to alleviate inflationary pressure in the United States, but also had a direct negative impact on many emerging economies, and Turkey, a Middle Eastern country, is one of them.
It is reported that Turkey’s current inflation is as high as 80%, the highest since 1998, and it is one of the countries with the most serious inflation in the world.
Turkish lira depreciates sharply, meat becomes luxury product
Affected by the U.S. interest rate hike, the Turkish lira has depreciated sharply since last year, with the depreciation exceeding at least 40%. From the beginning of this year to the present, the lira has still maintained a trend of sharp fluctuations, and has continued to fall by more than 20% on this basis.
The shrinkage of the lira has seriously affected the daily lives of local people, reducing their purchasing power and making many people unable to afford daily necessities.
A Turkish woman said that our current situation is very bad. People cannot even afford fruits and vegetables, and fathers cannot afford toys and food for their children.
In addition, with the skyrocketing prices, eating meat has become a luxury for ordinary people in Turkey. A Turkish butcher shop owner said that in less than a year, meat prices have increased by 100%, and meat sales have also declined. “The meat tastes good, but we can’t afford it,” said one Turkish resident.
The sharp depreciation of the Turkish lira will not only affect the daily lives of ordinary people, but will also intensify Turkey’s financial risks.
Ciolakoglu, director of Turkey’s Asia-Pacific Research Center, pointed out that Turkey relies heavily on foreign capital and has a heavy burden of foreign debt repayments. The Federal Reserve’s continued interest rate hikes have increased Turkey’s debt burden, triggered capital outflows, and intensified depreciation pressure on the lira.
As the Federal Reserve resumes its interest rate hike cycle, Turkey, as an economically fragile country in emerging markets, faces severe challenges such as capital outflows and continued currency depreciation, and its financial risks may further intensify in the future.
Inflation intensifies in Türkiye, small and medium-sized enterprises collapse
Turkey is a country that mainly relies on imported resources. Inflation has reduced the purchasing power of consumers and also increased the operating costs of local companies. Not only the prices of spare parts have increased, but almost all costs, including electricity and water bills, including labor, have been rising sharply.
In the first half of the year, a large number of small and medium-sized enterprises in Türkiye announced their closure.
According to data released by the Turkish Chamber of Commerce and the Federation of Commodity Exchanges, in the first five months of this year, more than 7,500 companies in Turkey closed down. Among them, as many as 2,000 companies closed down in May alone, an increase of 259.7% compared with the same period last year.
Turkish economist Enver Elkann said geopolitical risks and concerns about a global economic recession, coupled with uncertainty about exchange rates and inflation, have brought many challenges to businesses. Small and medium-sized enterprises in particular are more vulnerable as production costs, market conditions, and domestic and foreign demand have all been negatively affected.
Affected by inflation, the international credit rating agency Fitch lowered Turkey’s credit rating to B from B+ and confirmed its economic outlook as “negative.”
Beware of Foreign Trade Scam “Turkish Scam”
In view of Turkey’s deteriorating economic environment, freight forwarders need to beware of “Turkish scams” when shipping foreign trade goods!
In the European market, Turkey is one of the countries and regions with the highest risk rate and high trade risks. The notorious “Turkish Scam” is a typical example of foreign trade deception.
In this kind of deception, the scammer first registers a short-selling company in Turkey, and the company comes forward to defraud the goods exported from China to Turkish customs, deliberately delaying the time.
According to Turkish customs regulations, the importer should complete the delivery procedures within 45 days after the goods arrive at the port, otherwise the goods will be confiscated and auctioned. However, after the 45 days expire, the consignee (buyer) has two opportunities to apply for an extension, each time for 30 days, and does not need to submit a reason for the extension.
After that, the consignee still has an opportunity to apply for a 30-day extension to pick up the goods, but he needs to explain the reason for the delay to the customs. Therefore, with the cooperation of the consignee, the goods will usually not enter the auction process within 135 days after arrival at the port, but the costs of demurrage, warehousing and other costs incurred during this period are unavoidable. After the goods are included in the customs auction list, the original importer shall be the first purchaser.
At the same time, Turkey also has a customs regulation that is unfavorable to exporters: According to the regulations, the freight forwarder needs to register the goods in the name of the consignee before the ship arrives at the Turkish port.
Many illegal companies in Turkey have seized on these two points and used various means toThe delay leads to the final customs auction, where the goods are bought at a very low price and then sold at a high price to share the stolen goods.
Therefore, when dealing with Turkish merchants, you must first pay attention to the time of resale or return shipment, and secondly, try to use a letter of credit for payment, which is safer.
Under the current situation of high inflation in Turkey and a large number of small and medium-sized enterprises announcing their closure, importers are likely to take advantage of this loophole to trick suppliers due to cost pressures. Therefore, cargo owners and freight forwarders who have recently shipped to Turkey must be prepared for risks. Control and beware of risks such as abandoned goods and non-payment by buyers at the destination port to avoid losses caused by both money and goods being lost.
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