Over the past decade or so, Turkey's economy has had a very rough and challenging time, particularly rising inflation.
Official data as per July 2022, suggests that consumer price inflation is at 80% annually whilst producer price index rose to 145% for the same period.
The Central Bank of Turkey lowered its interest rate by 100 basis points to 13% earlier this month, a controversial move given that global interest rates are increasing to fight inflation. The bank's net reserves excluding swaps is at minus USD 53 billion.
The near term outlook seems very uncertain. To add to the woes, upcoming Presidential and general elections in July 2023 will add more pressure on the economy and suppress discretionary spending.
In contrast there is some positive news. The summer has witnessed strong tourist gold and jewellery purchases due to Turkish expats living in Europe.
As consumers cut back spending, demand for higher labor 14-carat jewellery has resurfaced. Additionally, jewelers are substituting diamonds with cubic zirconia stones to address falling profit margins.
Gold jewellery fabrication has fared much better owing to dramatic export growth of 115t last year (48t in 2012). Middle East markets (Iraq, Libya, Israel, Egypt and UAE) were the main beneficiaries. USA and Hong Kong took third and fourth spots respectively.
A key contributor was the Istanbul Jewellery Show which filled the void of other international shows being cancelled due to the Covid pandemic. Labor wages were reduced as the Lira depreciated that allowed manufacturers to be price competitive.
However, going forward, it may be difficult to see further improvement in exports if high inflation and rising global interest rates dampen consumer sentiment.
Exports this year should also lose the benefits of many markets' earlier heavy re-stocking.