Plummeting Turkish currency reaches all-time lows: consequences for property owners and tourists
The Turkish Lira has been facing a significant challenge in 2025, with persistent high inflation and unconventional monetary policy decisions contributing to its long-standing weakness.
Persistent inflation, which was nearly 45% in early 2025, coupled with unconventional monetary policy decisions, including the lowering of interest rates despite high inflation levels, undermined investor confidence. The Turkish Lira depreciated against the dollar by 44% in 2021, 29% in 2022, 37% in 2023, and 16% in 2024. Trade deficits and reduced foreign currency reserves, as well as political and institutional challenges, further exacerbated the situation.
The weakening Lira has had a significant impact on the prices of imported goods. Products like Nutella, which rely on imported raw materials or are imported finished goods, have seen price increases reflecting the devalued Lira. Consumers face higher costs for foreign brands and goods, worsening inflation-driven living costs and reducing purchasing power, especially for imports priced in stronger foreign currencies such as the US dollar and euro.
The price of hazelnuts, a key commodity for Turkey, has increased by more than a third since the beginning of the year. The state grain board set the official minimum purchase price for hazelnuts to around 4.20 euros per kilogram, a 17% increase from last year in euros, but representing an over 50% increase in local currency due to the Lira's depreciation.
Despite some progress in fiscal reforms and attempts at stabilization creating cautious interest from foreign investors, the macroeconomic backdrop through 2025 remains challenging for the Lira and import prices. Analysts at US investment bank Morgan Stanley expect the central bank to cut its benchmark rate three more times this year, ending at 36%, and forecast inflation to be around 25%.
The ongoing weakness of the Turkish Lira is not foreseeable, with arrests and political repression eroding trust in the currency. Only the Argentine Peso is weaker among emerging markets in 2025. However, the currency devaluation makes traveling to Turkey more attractive for tourists, with travel, food, and accommodation now cheaper compared to before.
The abolition of the KKM system, introduced in December 2021 to strengthen confidence in the Turkish Lira, has cost Turkey around 60 billion dollars to date. The system, which involved the selling of foreign currency to the central bank at a fixed rate, aimed to stabilize the Lira but has been criticized for its high cost and lack of effectiveness.
The weakening Lira has also had implications for Turkey's dominance of the global hazelnut market. Companies may switch to other types of nuts, particularly almonds, due to the increased cost of hazelnuts. Rainer Luckenhausen of Schlueter & Maack, a hazelnut trading house, estimates this shift in supply and demand patterns.
In summary, the weakening Turkish Lira in 2025 is primarily due to persistent high inflation, unconventional monetary policy decisions, trade deficits, reduced foreign currency reserves, political and institutional challenges, and a cold snap in April that caused damage to hazelnut blossoms and shoots. These factors have led to a significant increase in the prices of imported goods, including hazelnuts, and have worsened inflation-driven living costs for Turkish households. The ongoing challenges facing the Lira suggest further depreciation and continued economic instability.
Domestic consumers face increasing costs for foreign brands and sports goods, as the devalued Turkish Lira reflects in higher prices for imported items, worsening inflation-driven living costs and reducing purchasing power.
The weakening Turkish Lira, coupled with higher prices for key commodities like hazelnuts, could potentially shift the global demand for sports equipment or sports goods that heavily rely on hazelnuts in their production, such as Nutella, to alternatives like almond-based products.
