In a twist that's left many economists scratching their heads, Turkey has topped a global wealth ranking, despite its rampant inflation. According to Swiss bank UBS's Global Wealth Report 2024, the wealth per adult in Turkey surged by more than 157% between 2022 and 2023. This kind of remarkable increase is something rarely seen and has catapulted Turkey ahead of all other nations in this regard.
"Turkey stands out with a staggering growth of over 157% in wealth per adult between 2022 and 2023, leaving all other nations far behind," UBS noted. For contrast, Russia and Qatar followed with nearly 20% and South Africa with just over 16% wealth growth per adult. Even the U.S., with an almost 2.5% rise, couldn't come close.
The hefty inflation rate in Turkey, nearly 72%, presents a real burden for its 85 million residents. Many have experienced a dramatic decline in purchasing power. Yet, Turkey’s real estate market has seen a boost, partly due to this inflation. Samuel Adams, an economist with UBS Global Wealth Management, explained, "if you have a real asset like housing, the house prices tend to rise in line with inflation, if not even faster." This creates an illusion of increased wealth among those who own property.
The Turkish lira tells another part of the story. Plagued by its own problems, the currency has seen an 83% drop in value against the US dollar over the past five years, landing at 33 lira to the dollar recently. This devaluation has a ripple effect, impacting everything from the price of imports to everyday goods.
President Recep Tayyip Erdoğan, meanwhile, remains optimistic about the country’s economic trajectory. He lauded a 4.5% economic growth in 2023, surpassing forecasts despite a February earthquake and other challenges. "The Turkish economy has achieved a very important success," Erdoğan declared at a rally in Kütahya. Yet, many Turks continue to struggle; the country's annual inflation rate stood at 64.86% as of January, making basic necessities increasingly unaffordable.
The UBS report throws in an interesting twist here with what it calls the "currency effect." When wealth is measured in local terms as opposed to US dollars, the figures can tell a different story. For instance, Turkey’s incredible 63% growth in wealth in USD terms more than doubles to nearly 158% when measured in Turkish lira. Comparing long-term growth, UBS noted that between 2008 and 2023, Turkey saw a 1708% rise in average wealth per adult in local currency, a staggering figure indeed.
Yet, the paradox remains. As Paul Donovan, Chief Economist at UBS Global Wealth Management, puts it, a person can be "asset rich and cash poor." In Turkey, this is more than just a saying. While owning a home might make one’s balance sheet look rosy, the reality for many is starkly different. Real wages are on the decline, causing substantial stress in household budgets.
The Turkish Statistical Institute (TurkStat) reports a monthly minimum wage of 17,002 Turkish lira ($544) as of January 2024. However, the survey by Türk-İş found that a family of four needs 52,955 Turkish lira ($1,695) to avoid poverty, highlighting the gaping disparity between income and living costs.
Vice President Cevdet Yılmaz remained upbeat about future prospects, emphasizing a shift toward a more qualitative growth model driven by investments and exports. He underlined an improved current account deficit and anticipated moderate growth for 2024.
But for many Turks, these economic indicators hardly resonate with their lived experience. Stories of long queues outside state-run meat shops are commonplace. People line up as early as 1:30 a.m. in freezing weather to buy meat at reduced prices. Such scenes underscore the economic distress that many face.
This dichotomy is perhaps best summarized by Samuel Adams when he said, "if you’re not in those assets, if your wage rises don’t keep pace with inflation, it will be fairly negatively affected."
As Turkey gears up for its local elections in March, Erdoğan's government faces mounting criticism. Accusations of mismanagement, currency devaluation, and rising living costs have kept the administration on its toes. Erdoğan’s recent success in the presidential elections, beginning his third decade in power, sets the stage for a highly charged electoral atmosphere.
Despite the glowing figures in wealth reports, the on-the-ground reality remains challenging for many. The efforts of Turkish authorities to steer the economy toward a more sustainable and inclusive growth model are indeed noteworthy, but it’s clear the country has a long way to go before wealth becomes truly equitable.
In such a complex landscape, where statistical abstraction meets gritty reality, the upcoming months will be crucial. As officials prepare for the local elections and citizens continue to navigate these economic challenges, Turkey stands at a crossroads. Will the promised qualitative growth materialize in tangible ways for the ordinary Turk, or will economic gaps continue to widen?
