On Sunday July 17, two days after the Turkish coup attempt had failed, Murat Asik walked through an Ankara shopping mall hunting for a deal on a cell phone. By noon he had traded in an old iPhone for the newest Samsung, knocking at least 10 per cent off the price just by pointing out to the salesman that he was the only paying customer in sight.

The salesman should have stuck firm for it seems nothing can fully derail the driving force of the Turkish economy: the cell-phone upgrading, second-home buying, credit-card maxing consumer.

Domestic demand represents almost two-thirds of Turkey’s GDP growth, and despite years of promising to wean the economy off consumption, President Recep Tayyip Erdogan has spent the months since July stoking this engine. He has made it easier for Turks to spread credit card instalments, berated the central bank for not cutting rates faster, called private bankers “traitors” for not dropping mortgage rates — they did so immediately — and reminded his aides that he expects Turkey to eke out at least 4 per cent growth by year-end.

That represents both an opportunity and a danger for the economy and for local and international firms vying for some of the approximately $10,000 per capita income of the average Turk. Every time the Turkish economy warms up, its current account deficit swells, prompting regular warnings about its large (close to 30 per cent of GDP) net annual external financing requirements. But every time the economy outperforms its Bric and Mint peers, bargain-hunters prop up its stock market.

Investors are worried about the risks, says Jonathan Friedman, a London-based analyst at Stroz Friedberg, but where else can they go? “The other big emerging markets — Russia, Brazil, Iran — pose even greater challenges due to a mix of sanctions, recessions and political paralysis. So investors realise that Turkey is going through a tough time. But they look at the size of its consumer market, and it remains attractive.”

Turkey is an attractive option largely because of its consumer base, which Mr Friedman describes as sophisticated and interested in western brands and goods.

I am not saying we want to encourage consumption, but we will remove restrictions

Despite this, retailers have not yet fully cracked how to sell goods profitably to Turks using western-style methods. This year, Teknosa, a Turkish electronics retail chain, shut down dozens of stores. Others groups have contracted or cut back on expansion plans, while smaller family-run retailers blossom.

Michael Weiss, managing partner for Turkey at consultants AT Kearney, says: “There is no single model for a Turkish consumer. We have too many copy cats, especially on the basic retail side.”

He says one sign that the market may be saturated, or the consumer too indebted, is the fact that consumption has stayed flat despite a 30 per cent rise in the minimum wage. This increase has not led to a rise in shopping, Mr Weiss adds, because many households were already in debt. Instead, Turkish consumers are trading from premium purchases to more economic ones and from economic to cheap. The exception is the more affluent shoppers, whose conspicuous consumption — cell phones, cars, restaurants — is yet to be squeezed.

Retailers are not positioning themselves to win younger consumers, Mr Weiss says. “Companies are over-invested in shops, assuming that the high-margin European model will work.”

For the government, keeping Turks spending without being excessive is important. Nihat Zeybekci, the minister of economy, said on a visit to London: “It may be that there will be some restrictions on purchases of unnecessary luxury goods. But in general, the problem is not excess demand but lack of demand.

“I am not saying we want to encourage consumption,” he warned. “But we will remove restrictions on consumption.”

This is a delicate dance but, for now, Turkey’s lopsided growth remains attractive to investors. “Turkey’s been very lucky. If it had faced a coup attempt in any other sort of global risk environment, the impact on investors would have been far greater,” says Mr Friedman. “But with meagre growth around the world, investors work wherever they can find opportunities.”



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