Migrants, Terrorism and Russian Sanctions Effect Turkish Economy

While terrorism and Russian sanctions have left Turkey’s already struggling economy bracing for the worst, the issue of thousands of illegal migrants is also taking its toll on the country.

Turkey is on a major migration route with record breaking numbers of illegal immigrants from its economically and politically unstable East trying to cross its territory towards Europe. Turkey has already taken in around 2.5 million refugees so far, three times the number that has sought refuge in Europe and the influx continues.

Since the outbreak of the Syrian war, Turkey has acted as a buffer zone between the Middle East and Europe. It’s one of the places refugees head first, to safety, while they work out what to do next. Of the one million refugees and migrants who ended up in Europe last year, 800,000 arrived in Greece via Turkey. Although the Syrians are the bulk of the migrants, there are many Afghans and Iraqis included in the numbers.

Despite its not being a current member of the EU, Turkey has turned to the world body for assistance with its immigrant problem.

Only last Friday, the European Union finally sealed a controversial deal with Turkey intended to halt illegal migration flows to Europe in return for financial and political rewards for Ankara. The accord aims to close the main route by which a million migrants and refugees poured across the Aegean Sea to Greece in the last year before moving on to Germany and Sweden in the north.

Under the pact, Ankara would take back all migrants and refugees, including Syrians, who cross to Greece illegally across the sea. In return, the EU would take in thousands of Syrian refugees directly from Turkey and reward it with more money, early visa-free travel and faster progress in EU membership talks. The returns are to begin on April 4, the same time the resettlement of Syrian refugees in Europe begins. The arrangement comes as border closures have left financially strapped Greece with a build-up of tens of thousands of migrants who have entered from Turkey.

While the agreement is being welcomed in Brussels as a game-changer, Amnesty International condemned it as a "historic blow to human rights", saying Europe was turning its back on refugees.

In addition, there are concerns whether it is legal or workable, a point acknowledged even by German Chancellor Angela Merkel who has been the key driving force behind the agreement.

Turkey is demanding some 6 billion euros to help deal with the crisis and wants big concessions, particularly on its application to join the EU.

The money could go a long way in helping the Turkish economy which is struggling to hold its own.

Struggling Turkish Economy

Tourism is certainly taking a major blow to the economy and the combination of Russian sanctions and terrorism fears are having a ripple effect, hurting not only hotels and resorts, but also shop owners, cab drivers and street vendors, whose livelihoods depend on visitors.

The recent wave of bombings come as the Turkish economy started to feel the effects of the Russian measures which Moscow imposed following a diplomatic row with Ankara over Turkey’s downing of a Russian fighter jet in along the Turkish-Syrian border last November.

The sanctions are largely aimed at Turkey’s tourist, agricultural and banking sectors and include a ban on the import of Turkish fruits and vegetables, poultry and even salt, a financial loss of about $764 million, according to the Turkish Agriculture Ministry.

Moscow also banned the sale of charter vacations to Turkey for Russian citizens and shops selling mostly leather products, clothes, carpets, and souvenirs are already feeling the impact.

In addition, Moscow has suspended a new pipeline project called "Turkish Stream" that was to deliver natural gas exports to Turkey. Russia's state nuclear company Rosatom suspended work on a $20 billion nuclear plant in Akkuyu, Turkey.

In total, experts predict that Turkey will lose $3.1 billion worth of trade in 2016 due to Russian economic sanctions. However, Aydin Sezer, a former trade official who represented the Turkish government in Moscow, put the losses closer to $12 billion annually — four times Turkish government estimates.

Stocks Recover

Despite its migrant and terrorist struggles, Turkish stocks seem to be recovering. The BIST 100 index of the Borsa Istanbul stock exchange had dropped below the $25,000 level, the lowest long-term support level by analysts. But the latest data compiled from the Central Bank of the Republic of Turkey (CBRT) and the Borsa Istanbul, show that foreign purchases have boosted the BIST 100 index over the past four weeks with investors residing abroad making net purchases of $1.76 billion between Feb. 15 and March 11. When government securities are factored in, the number increases to $1.875 billion, which raised the BIST 100 index 4.15 percent to 27.668 as of March 11.

Last week’s U.S. Fed decision to keep interest rates steady has increased global appetite for risk taking and has moved the dollar 2.8435 against the Turkish lira, the lowest level in the past four months. Analysts predict that the optimistic prices in lira will continue, and as long as the dollar-lira exchange rate stays under 2.86, downward movement should continue. On March 18, when the operations on the Borsa Istanbul closed, the exchange rate was fluctuating around TL 2.6600 per dollar.

Cina Coren
Cina Coren is a former Wall Street broker and financial advisor. She holds a Master's degree in Communications and spent many years writing for international news outlets and journalistic publications. Today, Cina spends most of her time writing internet articles and blogs, and reading various newspapers to stay on top of the news.