By Ceyda Caglayan and Canan Sevgili

ISTANBUL, (Reuters) – Restaurants and businesses from Turkey’s services sector have announced that they will increase prices in order to pay for a 50% increase in minimum wages next year. This was in response to President Tayyip Erdogan’s announcement of a rapid-moving lira crisis.

Officials representing the most lucrative sectors, such as retail and clothing-making, informed Reuters they would need to account for the rise in prices that will begin next month. Others warned of job losses.

Due to some tax relief, the wage increase, which will take effect Jan. 1, will result in a 40% cost hike for employers. This would increase inflation by allowing sticker prices to pass through, as it is already above 30%.

Ramazan Bingol (chair of All Restaurants and Tourism Association – TURES) stated that “We can’t afford to pay this out of our pockets.” What is the outcome? We will see it on our menus, and in the faces of customers. This will lead to a downward spiral.

Bingol stated that after the wage increase, the restaurant sector’s labour costs will reach 25%.

Turkey’s currency crisis intensified on Friday, with the lira falling by around 8%. This was due to concerns about an inflationary spiral triggered by Erdogan’s unconventional plan to reduce interest rates in response to rising prices.

Within the last 30 day, the Turkish lira saw a 40% drop in its value. This is causing a shakeup of the economy as well as putting pressure on the Turks’ finances. Erdogan claims that his economic plan prioritizes credit, growth and exports, in spite of criticisms from economists and other politicians.

It will cost 6,253 Lira ($275/month) to pay the minimum wage next year, which is 4,253 Lira (about $275). The increase in consumer prices is anticipated to be 3.5-10 percentage points.

Yusuf Kaptanoglu is the owner of Pideban Istanbul. He said that rent-paying companies would suffer first. He stated that businesses operating in the food- and beverage sector like his will soon be closing due to price rises.

Sevket Aeddinoglu was the chairman of Dogal Dukkan Restaurants and echoed this gloomy sentiment.

Alaeddinoglu stated, “In this exceptional situation, one the measures that we will take in order to continue our company will be to serve less personnel.”

Ramazan Kaya (president of Turkish Clothing Manufacturers Association) stated that labour costs in ready-made apparel and clothing are currently around 35%. He said that prices could rise up to 50% next year.