It is not just the temperature that is rising on the Turquoise Coast, right now.

If you are here on holiday, not only will you have noticed how brown (or red) you have rapidly turned, you will also have spotted just how many Turkish lira you are getting for your British pound - or euro, or US dollar.

The mid-rate from banks is around 2.66 (GBP/TL) at the moment.  This time last year it was only 2.34.

You can see from the chart below, the trend over the last year.

Chart sourced from www.oanda.com

If that is as much as you need to know - i.e. you can afford to buy more Efes, Angora wine, and eat out more, you don't need to read any further.

Double edged sword
Of course, from a Turkish perspective, their currency is being devalued against other major currencies.  This is a double edged sword for Turkey.

On the one hand it may well attract even more tourists, as they will get better value for money.  And Kalkan certainly needs a few more visitors, as the numbers are well down on the same time last year.

But it also means that their imports are more expensive, and as Turkey has a rapidly growing economy, (the fastest of the G20 countries), importing oil and raw materials, not to mention consumer goods, this hits their balance of payments.

The Turkish authorities, led by Finance Minister Mehmet Şimşek, and the Central Bank of Turkey (CBT), are grappling with a current-account deficit, which has widened to become the biggest since records began in 1984. 

The weakness of the lira is a direct consequence of CBT policy, most notably in relation to interest rates, as they attempt to cope with the dilemma created by having a strong economy and a floating currency. 

CBT limits on bank lending will help to narrow the deficit by the end of the year, and the government is also trying to boost local production, to reduce the country's reliance on certain imported goods.

The jury is out
Economists are divided on the CBT's unorthodox approach, however you can't help but notice how well they did in the recent global financial crisis, so perhaps they really do know what they are doing.  Also, there have been a couple of encouraging reports on the Turkish economy over the last few days.

Unemployment in Turkey fell to just under 10% in April, down from 12% at the same time last year.  And in the first half of 2011, Turkey achieved a 41 year record high budget surplus, thanks in part to an amnesty on late payment fines for overdue tax, which encouraged more people to pay.

In some ways, the Turkish economy is in unchartered waters, but despite the balance of payments issue, we reckon that they can say, so far so good. 

And for the record, it may be stating the obvious, but in economics, everything is relative.  A quick glance across the Aegean, and at the nearby Euro-zone will tell you that things are not exactly rosy at the moment.  In comparison to some places, Turkey is positively flying.

How will exchange rates go in future?
And back to the exchange rate - where will this go in future?  If anyone tells you they know the answer to this question, don't believe them.  Trust us on this - even if their name is Weir and they come from Larg, in Ayrshire, your guess is as good as anyone else's.

But what we can say is that if you are thinking of coming out to Kalkan, or Turkey in general, now is a pretty good time to do so. 

And we do confidently predict lots more hot and sunny weather.  So get your skates* on, and make the most of it.  Don't forget your sun screen!

Kalkan Turkish Local News - your window on Kalkan Turkey

* Flip-flops may be more appropriate.