Turkey's economic woes caused mainly by the depreciating currency and high inflation during the last five years are likely to be further exacerbated in the global environment of high commodity prices and supply chain disruptions. The erosion of purchasing power and deteriorating economic outlook are evident in data provided by both the domestic and international authorities. However, alternative data like the transactions with credit and debit cards might offer a different angle of observation of the crisis. The Central Bank of Turkey and the Interbank Card Center publish such statistics in weekly, monthly, quarterly and annual frequencies. The Interbank Card Center was founded in 1990 as a partnership between public and private banks with the purpose of designing policies and standards for credit and debit card payments in Turkey.

The Turkish lira was among the worst performing currencies against the US dollar during the last couple of years, with the depreciation in 2021 being a staggering 77%. In 2022, as of the end of June, the currency weakened by 28%. Annual inflation is approaching 80% y/y during the same month compared to 12% y/y at the beginning of 2020, prior to the pandemic and the related economic disruptions. Against this background, since 2016, Turkey's monetary policy saw more frequent changes in the central bank's governor, as well as interest rate cuts in a high inflation environment, ultimately leading to a critical lack of predictability and consistency.

Zooming out to observe the historically more distant data, a curious dynamic with the POS terminals is detected. The number of POS terminals started plunging towards the end of 2015, from over 2mn units, apparently bottomed out at the beginning of 2019 and started increasing again but at a more moderate pace. As of March 2022, it stands at around 1.7mn units. The decline in the number of POS terminals might be associated with an increased preference for cash payments. In an unstable economic environment and specifically in the light of ever increasing prices, the attempts for tax avoidance also increase, both by merchants and individuals.

The credit and debit card data can detect patterns in the 84mn population's consumption habits and the higher frequency-time series could be monitored in search of clues for potential inflation dynamics. For example, comparing the value and the volume of the bank card transactions serves this purpose, as the value indicator is going up in a much steeper line compared to volume one. In general, the data breakdown points to an increased value across the board and at a faster pace since 2020, unsurprisingly, due to the accelerating consumer price growth.

Going back to 2020, the initial COVID-19-related shock in the spring is visible on the charts and especially well pronounced in the international cards dynamic. Further, the transactions with international cards exhibit higher seasonality which was disrupted by the onset of the pandemic. Although the transactions with international cards are significantly less than the domestic ones (TRY 14bn versus TRY 200bn, respectively, as of March 2022), they are worth monitoring in the current year 2022, as Turkey is bracing for a worse summer tourism season because of the war in Ukraine.

Turkey is a popular tourism destination for Russians, but as the country is subject to tough sanctions, Russians will likely reduce discretionary spending such as vacations abroad. Hence, Turkey is expecting to welcome fewer Russians since the military war in Ukraine is ongoing. So the question would be: Can the cheaper lira attract enough visitors from countries with stronger currencies to compensate for the reduced arrivals from the Russian Federation?