Downside is the devaluation of the Lira, but this also has an upside; Turkish exports become more competitive.
Turkish exports become more competitive
Also, the naïve view that currency deval is always beneficial to exports is simply untrue. It always complex and multifactor for each scenario and each country... and even each good. A better general rule: A modest, consistent devaluation of currency is good for your exports, as it allows enough time for your value add staged to find internally produced substitute inputs. If deval is very fast, few businesses can adapt fast enough. If deval is very slow, it is hard to notice the effect.
I never thought about tourism this way. Hat tip! WTO says:
Tourism is an export sector. It is a source of foreign exchange earnings; it grows a countryʻs national output; it is subject to the rigours of the international marketplace.
To clarify this phrase: Do you mean: Tourism, as a share of GDP, has _recently_ doubled? Google tells me: 2014: 4.7% -> 2019: 11% (LGTM)
Or do you mean something else? (I promise: I am not nitpicking.)
Can you explain how it can exceed the export gain?
Say there is some Turkish export product, to keep it simple let's say it's a car which needs some metal as an input, that has to be imported. If the Lira goes down, this means the metal becomes more expensive in terms of Lira's. So this has to be accounted for in the price of the exported cars. However, that accounted price increase is the same as the rise in import price. What is left is the added value within Turkey, which has become cheaper because of the Lira drop.
So even though export price drops are slower than the drop of the Lira, they still drop.
Does this follow necessarily? If wage-earners have a fair degree of bargaining power or if wages are indexed, then the decrease in value of the lira will result in an increase in nominal wages. And in a condition of steady but substantial inflation, currency can be reduced to a medium of exchange rather than serving as a store of value - or in the case of contract negotiations, as an indication of the future value. Chances are, wage earners and others contracting for future delivery will just naturally take inflation into account when arranging the contract. Their payments might be in lira, but they way they set their prices is derived from the lira/euro exchange.
This is all basically what anti-inflation hawks mean when they say "we have to prevent inflation expectations hardening" etc. They want people to believe that a dollar today will have about the same value as a dollar next year.
So if you have a generally stable currency that depreciates and finds a new level, it might make the economy more competitive. If you have a currency that regularly varies, sometimes up, sometimes down, a depreciation might not mean much to its competitiveness (because an investor expects that the depreciation today has no relation to its value next year). And if you have a currency that is steadily declining, well, everyone has already accounted for that possibility so relative prices quickly adjust to return to the previous levels.
At some point it makes more sense for commodity producers to leave the oil or copper in the ground because the commodity in the ground is more valuable than what can be earned digging it up, converting it to cash and the losses of holding the cash relative to inflation and taxes.
When things reach that point nations typically have enforced capital controls, fixed exchange rates, and then will nationalize commodity producers and will attempt to implement some form of commodity price controls. Production drops to nothing and the end result is usually a concentration of wealth and power in a small percentage of well connected individuals who strip the country of wealth. This leads to entrenched strong men and oligarchs (Russia, Venezula, Zimbabwe).
The best part is that initially the middle class cheers inflation with rising property values and wages. As the inevitable enshittification and looting of the economy ensues it isn’t obvious that a choice was made and who is to blame. The misery is blamed on foreign powers, the political opposition, and the poor while power and wealth end up in the hands of a few.