On July 9th, 2018, Recep Tayyip Erdogan was re-elected as the President of Turkey for a new term. While this news was welcomed by his supporters, it triggered a record low for the Turkish lira. The currency has been struggling for months, but Erdogan’s victory seems to have exacerbated the situation.
The Turkish lira has been under pressure due to a number of factors, including high inflation, a large current account deficit, and political uncertainty. The country’s central bank has been trying to support the currency by raising interest rates, but Erdogan has been critical of these efforts. He believes that high interest rates are hurting the economy and has called for lower rates.
Erdogan’s victory in the presidential election has raised concerns about his economic policies and his influence over the central bank. Many investors fear that he will continue to push for lower interest rates, which could lead to further depreciation of the lira. In addition, his recent appointment of his son-in-law as the Minister of Finance has raised questions about his commitment to economic reform.
The decline in the lira has already had an impact on the Turkish economy. Imports have become more expensive, which has led to higher inflation. This, in turn, has hurt consumer spending and business investment. The country’s current account deficit has also widened, as exports have become less competitive.
The situation in Turkey has also had an impact on other emerging market currencies. Investors are becoming more risk-averse and are pulling their money out of countries with weaker fundamentals. This has led to a sell-off in currencies such as the South African rand, the Brazilian real, and the Indian rupee.
To address these concerns, Erdogan will need to take steps to reassure investors and restore confidence in the Turkish economy. This could include implementing structural reforms to address the country’s economic imbalances, reducing political uncertainty, and allowing the central bank to operate independently.
In conclusion, Erdogan’s new presidential term has triggered a record low for the Turkish lira. The currency has been struggling for months due to a number of factors, including high inflation and political uncertainty. Erdogan’s victory has raised concerns about his economic policies and his influence over the central bank. To restore confidence in the Turkish economy, he will need to take steps to address these concerns and implement structural reforms.
