Turkey collapsing

Istanbul’s new airport ~200 million passengers a year when
completed in a decade, makes it busiest airport in the world.

The Yavuz Sultan Selim Bridge has little traffic because of
high tolls.  The government is paying the shortfall.

Turkey's president, Recep Tayyip Erdogan, who has dominated national life for 15 years, was sworn in again for 2nd term on July 9, 2018, following a re-election victory that came with extraordinary new powers. The winner of the presidential race is set to assume extraordinary new powers narrowly approved in a referendum last year that was marred by allegations of fraud. These include complete control of the cabinet and the power to appoint senior judges and officials, including unelected vice-presidents. The president will also have the power to issue decrees with the force of law.

• He has wielded his influence to deliver relentless economic growth through unrestrained borrowing, lifting debt levels to alarming heights. 
• In a conspicuous sign of unease among global investors, the value of Turkey’s currency, the lira, has plunged by roughly one-fifth this year, raising prices for households and businesses alike.
• Once complete by 2028, Istanbul’s new airport will have three terminals, six runways and an annual capacity of up to 200 million passengers flying through to more than 350 destinations across the world. It is double the passenger capacity of the world’s busiest Atlanta airport that currently services 100 million passengers a year. The airport's first phase is to open in October 2018 has been brought to life with heaps of public money delivered to construction companies closely tied to Mr. Erdogan. The government has bestowed upon them guarantees against any losses. The airport might prove grander than the flow of passengers, the public will wind up with the bill.
• The New Airport is often referred to as a white elephant, given the mammoth funds poured into it. The builder, iGA, is a 100% private consortium with five equal shareholders. They are going to pay approximately €1 billion rent to the government. In addition, they have €10 billion investment cost. The Turkey Economic Impact Analysis, published in June 2016 estimates that the airport will make $40 billion worth of contributions to Turkey's economy by 2025.
• Turkey's economy expanded by 7.4% last year and the growth has been fed by unsustainable public and private borrowing. But the economy is already stumbling.
• The government has been subsidizing vast infrastructure projects like the airport and 28-mile-long canal linking the Black Sea to the Sea of Marmara. The canal estimated to cost $15 billion (critics say is closer to $65 billion), and displace some 800,000 people has been dubbed his crazy idea. Environmentalists warn that Istanbul's ecosystem damage would make it uninhabitable. Economists say the project is not financially viable.
• Many businesses have borrowed in foreign currencies, which means their debt burdens have risen as lira depreciates.
• Major Turkish companies are persuading banks and other creditors to extend relief, indicating a wave of bankruptcies that could leave financial institutions and taxpayers staring at untold losses. Turkish private sector companies owed more than $245 billion in foreign debt, or nearly one-third the size of the country’s overall economy. And the government is encouraging them to borrow more.
• Turkey can court money by continuing to lift interest rates, already at 17.75%. But that would depress economic growth and hurt real estate and construction industries.
• Turkey can continue the growth while inflation mounts and lira sinks further. That may result in several corporations to insolvency, and force the government to seek a rescue from the IMF, a course that entails painful spending cuts.
• Turkey could be the next country to disintegrate. It has all the ingredients of the beginning of a failed state.
• Some of Turkey’s problems reflect the troubles assailing emerging markets in general. As the US Fed raises interest rates, investors pulling money out of developing nations like Argentina, Mexico and Turkey has pushed down the value of emerging market currencies.
• Everyone is in crisis right now. It’s all around us. Everyone who has the slightest intellect and knowledge of the economy knows this. But the government is hiding it ... says a businessman.
• In Istanbul, merchants complain that they must pay rent in dollars or euros even as they collect lira for their sales. Their rent is effectively going up while sales decline, partly because of a dip in tourism after a spate of terrorist attacks.
• The Turkish lira is like ice in hot weather. The second you take it out, it starts to melt ... says a trader.
• The most vulnerable companies are those that have borrowed in foreign currencies. Four years ago, a company borrowed 200 million lira (~$88 million) for its aggressive expansion from banks at 18% interest. In a bid to limit its debt burden, it borrowed an additional $12 million in the American currency, taking advantage of dollar loans at only 5% interest. By the middle of 2017, the lira had lost more than one-third its value and Turkish interest rates were climbing. The company’s monthly debt payments had risen by almost 50% and at the same time revenues plunged that compelled them to approach a court-supervised debt restructuring.
• A car leasing company insists on pricing his leases in euros to match the loans it takes out to buy new models of cars. With inflation rampant and anxiety pervasive the company, while selling cars after leases are complete, has to discount the vehicles to find buyers and lost money.
• Housing construction has reached its limit, and two million apartments are unsold in the country. Construction work is grinding to a halt, and companies are offering real estate on soft loans or barter.
• Turkey actually is not borrowing any money. These are the Turkish firms that are borrowing money; it is individual debt. But the government has guaranteed the loans and the revenue. This financing model is enriching private firms while saddling the country with debt.
• Inflation has ravaged livelihoods. The village markets have raised prices. Food imported from Romania and Bulgaria, is 50% more expensive than it was a few months ago. 

From soaring bridges to a giant mosque to plans for the world’s biggest airport, President Recep Tayyip Erdogan of Turkey has used gargantuan building projects as an engine of growth and a signature way of leaving an indelible stamp on his nation. The public is weary of Erdogan’s building mania. Erdogan’s projects are guided by an insatiable construction industry that has enriched his ruling circle, raising questions about his management of a faltering economy. Erdogan has created grandiose monuments and infrastructure investments in every town.