Thousands marched through Istanbul on Sunday after trade unions denounced the rise of poverty in the country and called for an increase of the minimum wage.
Turkey is currently experiencing a currency calamity due to the Turkish lira hitting record lows against the dollar – exceeding 13 to the US greenback this week –, losing nearly 30% in value in the last month alone, and over 43% since the start of the year.
The annual inflation surged over 20%, decimating the Turks' purchasing power.
The currency has been in freefall as President Recep Tayyip Erdogan has championed interest rate cuts despite rampant inflation.
Why is the Turkish lira crashing?
Erdogan insisted this summer that interest rates had to fall, taking the unorthodox view that high rates equal high inflation.
The central bank has since slashed the main interest rate by 400 basis points, sparking doubts about its independence.
In its latest decision, it suggested another cut was likely in December. But the lira's issues go deeper.
Erdogan, who has sacked three central bank governors since July 2019, has refused to accept any responsibility for the lira's collapse.
"I reject policies that will condemn our people to unemployment, hunger, and poverty," the Turkish President said, warning that the country was in a "war of economic independence".
Kerim Rota, who is in charge of economic policy at the opposition Future Party, said the lira was suffering the worst monthly devaluation since 1994, and the second-worst in the past 40 years.
"If it reaches 14.25 to the dollar at the end of the month, it will be the highest. It's now out of control, this is clear to see," Rota told local media.
The Turkish currency rose on December 8, trading at under 12 lira to the dollar.
What are the risks?
While many say Turkey's banking sector is stronger since the 2001 economic crisis, Capital Economics's emerging markets analyst Jason Turvey is concerned about the impact on banks and the potential for capital controls.
"Banks are better placed to cope with the spillovers from a weaker lira than they were a few years ago," Tuvey told AFP.
"The risk is that the lira suffers further sharp and disorderly falls that do trigger problems in the banking sector. A credit crunch could ensue that weighs heavily on economic activity."
"Any signs of a 'flood of withdrawal requests' from foreign exchange deposits would likely trigger more aggressive capital controls", he warned.
Over half of all deposits in Turkish banks are in foreign currencies, mainly dollars. Turkey's official inflation target is 5% but has stubbornly remained in the double digits in the past two years, nearing 20% last month.
Opposition parties say real inflation is much higher than what the official data shows.
Given the situation, the opposition has called for an early election ahead of a scheduled vote in June 2023, but Erdogan vowed that "there will be no early election".
What are Erdogan's expectations?
The president is prioritising growth with the economy expected to expand by 9% in 2021 and 3.5% in 2022.
During another currency crisis in 2018, the central bank aggressively hiked the main interest rate but the likelihood of a repeat under Erdogan is low.
Some experts have accused the president of seeking to make Turkey more attractive as a hub for cheap production with Turkish wages worth less in dollar terms.
Turkey's net monthly minimum wage of 2,825.90 liras amounted to $380 (€337) in January 2021, but as of Wednesday last week was equivalent to $222 (€197).