Turkey’s consumer confidence sinks following fresh taxes on consumption

Accelerating inflation, a depreciating Turkish lira, new taxes on consumption, and the brakes applied to consumer loans led to a sharp decline in the consumer confidence index in August. Unless the government takes populist measures due to local elections scheduled for March 2024 towards the end of the year, there is no reason for consumer confidence to recover.

The consumer confidence index, calculated from the results of the Turkish Statistical Institute’s consumer tendency survey, decreased by 15.1% in August, dropping from 80.1 in July to 68.0 in August. In May 2023, when the elections were held, the index was at 90.1. It hit the lowest level seen since June 2022.

Sub-indices show that the most significant deterioration is in the expectation that worsening economic conditions will prevail in the Turkish economy within the next 12 months (-23.2%). During the same period, there is also a deterioration of 19.6% in the expectation of household financial status. However, due to the known fact that interest rates will remain below inflation while the consumer price inflation will continue to rise, the deterioration in the intention to spend on durable goods within the next 12 months is much lower at 5.7%.