Erdogan’s Unorthodox Economic Policies Cause Turkish Lira to Decline

Recep Tayyip Erdogan and the Turkish Lira. A never-ending story. His unorthodox methods are causing problems for the currency.

Ankara – If Recep Tayyip Erdogan, President of Turkey, is re-elected, the Turkish lira is threatened with further currency depreciation. The lira has already fallen to a new record low against the US dollar. The leading Turkish index BIST-100 fell by up to 6.4 percent in pre-market trading after the election on Sunday. However, Erdogan had done much better than polls assumed and could triumph again in Turkey’s elections. Competitor Kemal Kilicdaroglu was at least able to force the president into the runoff.

“An opposition victory appears less likely and this will disappoint investors who had hoped for a return to orthodox economic policies and a more credible commitment to tackling Turkey’s inflation problem,” said Liam Peach, senior economist for Turkey Emerging Markets at Capital Economics, opposite CNN.

Possible Erdogan victory: Turkish lira falls to record low

The sharp drop in the stock market prompted the Istanbul Stock Exchange to temporarily suspend trading. The BIST-100 closed down 6.1 percent, while its banking sub-index ended the day down 9.2 percent. Overall, the Turkish lira fell 0.5 percent to 19.70 against the US dollar, hitting a record low. The currency’s value has fallen by more than 40 percent in the past year as Erdogan’s unorthodox economic policies have pushed inflation to unprecedented levels.

According to ratings agency Moody’s, an opposition victory could “improve the prospects of a return to orthodox economic policies which, if implemented effectively, would have a long-term positive impact on the country’s credit profile.”

Erdogan to blame for high inflation and weak lira

Still, “undoing the distorting measures of the past two years will be a challenge,” the agency said. The Turkish economy is very volatile. Despite mutual statements, Erdogan has not succeeded in bringing inflation down to a normal level. In October it had reached 85 percent, its highest level in a quarter of a century, but the actual values ​​could be significantly higher.

Since 2018, people in Turkey have been suffering from the currency collapse. Large sections of society are affected. From the working class to the bourgeoisie. Experts like Eissenstat blame Erdogan’s conviction for the crisis. According to prevailing economic opinion, low interest rates can further fuel inflation. Recep Tayyip Erdogan is a friend of low interest rates, but according to experts this is fueling the currency collapse. On the other hand, high interest rates would be necessary. (Moritz serif)