TÜRKİYE ORTA ASYA HABER KKUORDİNATÖRÜ

REUTERS NEWS IFJ-INTERNATIONAL FEDERATION OF JOURNALIST Turkish companies 'paying the bill' as political crisis shakes economy ISTANBUL, March 28 (Reuters) - The turmoil unleashed by the arrest of Türkiye's leading opposition leader earlier this month has sent shockwaves through the private sector, forcing companies to rethink their strategies and prepare for a period of uncertainty and potential economic instability. The arrest of Istanbul Mayor Ekrem İmamoğlu, who some polls show leads over long-serving President Recep Tayyip Erdoğan, sparked the largest anti-government protests in a decade, leading to mass arrests and international condemnation. The move also pushed the lira to record lows, fueling a sell-off of Turkish assets that destabilized corporate balance sheets and further increased already high borrowing costs. Company officials told Reuters that Turkish companies across various sectors are scrambling to reassess risk, with some halting planned investments and slashing budgets. "Industrialists are now having to pay for a crisis they didn't cause," said Şeref Fayat, president of System Denim, which produces clothing for leading Western brands and exports it to Europe and the United States. Fayat, who also heads a garment industry lobby group, said credit costs had increased due to market turmoil. He had been preparing budgets for his business's second-half growth in anticipation of a recovery in expected consumer demand from Europe. "Following recent developments, we immediately shelved those plans," he said. The lira has recovered somewhat after falling to a record low of 42 against the dollar, but only after the Central Bank stepped in to support the currency. Businesses, however, fear more hardship is on the way. Expectations of falling inflation and low interest rates, which promised Türkiye future relief after years of rising prices and currency collapses, now appear doubtful. The central bank raised its overnight lending rate by two percentage points to 46% in an unscheduled meeting. Bankers told Reuters that short-term commercial loan interest rates have risen from an average of 42-43% to 52-53%, with some rates reaching as high as 60%. He had been preparing budgets for his business's second-half growth in anticipation of a recovery in customer demand from Europe. "Following recent developments, we immediately shelved those plans," he said. The lira has recovered somewhat since reaching a record low of 42 against the dollar, but this only came after the central bank stepped in to support the currency. Businesses, however, fear more trouble is on the way. After years of rising prices and currency collapses, expectations of falling inflation and low interest rates, following the adoption of a traditional economic program promising future relief for Turks, now appear doubtful. The central bank raised its overnight lending rate by two percentage points to 46% at an unscheduled meeting. According to information provided to Reuters by bankers, short-term commercial loan interest rates have risen from an average of 42-43% to 52-53%, with some rates reaching as high as 60%. Morgan Stanley predicts that any cut in the central bank's policy rate will be delayed until June. Goldman Sachs, however, said it expects a 350 basis point increase. 'EVERY COMPANY NEEDS A PLAN' "Recent developments will most significantly impact companies' investment spending," said Hakan Kara, a former chief economist at the central bank and a lecturer at Bilkent University in Ankara, noting that investment was already slowing. "This situation will likely become more pronounced in the short term." The government has stated that the recent economic turmoil will be limited and temporary. However, some corporate officials fear the crisis may just be beginning. The 2028 elections are approaching, marking the end of Erdoğan's term, which has dominated Turkish politics for more than two decades. But many see the arrest of İmamoğlu, who was jailed on Sunday pending trial on corruption charges, as an early indication that he may try to cling to power through early elections or constitutional changes that are likely to face public opposition.