Turkish protests affecting economy

'Boycott' is the magic word among protesters out on the streets of Istanbul and all across Turkey these days. More and more of those critical of the government have cancelled their accounts and credit cards at GarantiBank, the country's third largest financial institution. The reason: A large part of the bank belongs to the Dogus Holding which also controls one of the country's news channels, NTV. And NTV so far – just like many other channels – has hardly reported about the protests.

"35 to 40 million lira in the past weeks have been withdrawn and around 1,500 credit cards have been cancelled," Ergün Özen, CEO of GarantiBank told Reuters news agency. That's around 16 million euros ($21 million). But the protesters are also targeting other branches of Dogus Holding. Many restaurants belonging to the company have seen demonstrations on their doorsteps with protesters encouraging guests to get up and leave.

Profit and loss

Other companies, however, are managing to benefit from the demonstrations on Taksim Square. "The construction site has not been good for business. Now at least there are the protesters and we supply them with everything they need," Ahmet Durmus told Deutsche Welle.

The 40-year old works as the manager of a restaurant not far from Gezi Park, one of the few green patches in the city center of Istanbul, which is slated to be bulldozed to make room for a shopping mall. Another person happy about the extra money he can make thanks to the demonstrators is a young man selling flags. "I used to have to go to concerts to sell my stuff. But now it's enough to just stand here," he says.

But as the Turks take to the streets, tourists increasingly are staying away. And that's biting into the profits of souvenir shops, like the one run by Rifa Güzel. He says that all he's doing is sitting in his shop, waiting. "I have losses up to 90 percent. The protests are really devastating for business," he complains. "There are direct consequences for tourism," confirms Seyfettin Gürsel, "but that's a problem limited to Istanbul."

Need for reforms

However, the economy as a whole is also affected. The Istanbul stock exchange took a dive and the Turkish lira has also dropped to its lowest level in 18 months. The unrest is to blame, explains Seyfettin Gürze, director of the economics faculty at Bahcesehir University in Istanbul. "Before the crisis, direct investment from abroad was very high and it financed a large part of the current accounts deficit. But since the crisis, those investments have declined."

Essentially, it's a structual problem, says Gürsel. "The current accounts deficit is mainly financed through debentures, short-term loans and short-term investments on the stock exchange. That is a structural weakness." Turkey needs reforms in the economic sector, he argues, for example, a comprehensive labor market and tax reforms. "Unfortunately, these reforms were postponed after the election of the current government and I'm not sure the government is aware of these structural problems," he said.

Investors are skeptical

The capital withdrawals had already begun before the unrest, Mustafa Sönmez, an economist and journalist, stressed to DW. "The protests have simply made it worse, because they affect the security situation and relations to the EU and the US. Investors are concerned by the unrest and have pulled back." His prognosis is candid: If the violence continues and the government makes no effort to accomodate the protesters, the economic situation will get worse.