The Turkish lira continues to decline, recording a decline that reached its lowest level on Tuesday, confirming the correctness of its classification of the emerging market currency as the worst performing in 2021.
It lost about four percent of its value to reach 10.36 against the dollar, but it returned and compensated for a small part of its losses ahead of an upcoming meeting of the Turkish Central Bank tomorrow, Thursday, during which it is expected that it will be decided to cut interest rates for the third month in a row.
As for the reasons, many financial analysts attribute to the economic policies pursued by Turkish President Recep Tayyip Erdogan, as well as the subjection of the Central Bank, although theoretically independent, to constant pressure from Erdogan to reduce the costs of doing business in order to stimulate growth.
While these policies set the Turkish economy on the path of achieving an economic expansion of 10 percent this year, they, in turn, raised the annual inflation rate to about 20 percent, while the lira lost more than a quarter of its value against the dollar this year.
In this context, Jason Tavi, an analyst at the Capital Economics Center for economic research, considered, in a statement to AFP, that “there are increasing risks that the Central Bank’s continuous acquiescence to Erdogan’s pressure in terms of reducing interest rates will lead to a significant and uncontrolled deterioration of the currency in the coming days and weeks.” “.
To win a second term
In turn, emerging markets expert Timothy Ashe said that Erdogan, whose popularity has fallen to nearly its lowest levels during his 19 years in power, decided to achieve rapid economic expansion at any cost that would help him win a new presidential term in the elections scheduled for 2023.
In a note to clients, Asch said, “It is interesting that Erdogan’s team believes that growth and job creation, not lowering inflation, will help him win the upcoming elections.”
It is noteworthy that the economic situation in the country launched a wave of criticism towards the policy pursued by the Turkish president. and mounted opposition parties More than once, he criticized Erdogan and his party, blaming him for the deteriorating economic conditions in the country.