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Thursday, May 23, 2024

Turkish Lira hits record lows as Erdogan secures third decade in power

Lira hits record lows as Erdogan secures third term, raising concerns about Turkey's economy and his unorthodox policies.

Turkey’s lira witnessed a significant and alarming drop to new record lows against the US dollar in the aftermath of President Tayyip Erdogan’s triumph in the recent presidential election. This outcome has sparked concerns, considering the country’s prolonged economic turmoil and the widespread criticism surrounding Erdogan’s unorthodox economic policies. Despite the challenging economic landscape, Erdogan’s victory solidifies his rule for a third consecutive decade. The gravity of the situation is amplified by the fact that the Turkish lira has lost over 90% of its value in the past ten years and has experienced a decline of more than 7% since the start of this year.

Erdogan’s Victory and Economic Turmoil

President Erdogan’s victory in the presidential election has raised concerns among critics, given the economic challenges Turkey has faced in recent years. Critics blame Erdogan’s unorthodox economic policies for the prolonged economic turmoil, which the opposition had promised to reverse. The result has led to uncertainty regarding the country’s economic future.

Read More: Recep Tayyip Erdogan’s resounding victory as he extends his 20-year rule

Lira Weakens to Record Lows

The Turkish lira experienced a significant decline, reaching a record low of 20.1050 against the US dollar. This represents the worst trading day in eight months, surpassing the previous record low set just days before the election. The lira’s value has decreased by over 7% since the beginning of the year and has lost more than 90% of its value over the past decade, plagued by inflation and economic volatility.

Economic Policies and Currency Crisis

Critics argue that without a change in Erdogan’s economic policies, the risk of an acute currency crisis looms. Following a currency crisis in 2021, Turkish authorities intervened in foreign exchange markets, resulting in minimal daily fluctuations. However, this approach led to dwindling foreign exchange and gold reserves. The lack of significant currency movements in recent months makes the 0.58% drop on Monday notable.

Stock Market Reaction

Despite the lira’s decline, the stock market experienced a rally in response to the resolution of electoral uncertainty. The benchmark BIST-100 index rose by 4.10%, and the banking index closed up 2.13%. However, analysts remain cautious about sustaining these gains due to broader economic challenges faced by the country.

Foreign Investor Concerns

Foreign asset managers’ share in Turkish stocks has diminished in recent years, with local investors driving the market. The reluctance of foreign investors can be attributed to the economic volatility and uncertainties surrounding Erdogan’s policies. This dependency on local investors may pose challenges in stabilising the market and attracting foreign capital in the future.

Read More: Turkey’s historic election runoff: Erdogan vs. Kilicdaroglu

President Erdogan’s victory in the recent election extends his rule into a third decade, despite widespread criticism of his economic policies. The Turkish lira reached record lows against the US dollar, reflecting the country’s economic challenges, including inflation and boom-and-bust cycles. While the stock market experienced a temporary rally after the election, concerns remain about sustaining these gains amid broader economic troubles. The absence of a U-turn in Erdogan’s economic policies raises the risk of an acute currency crisis, further exacerbating the economic challenges faced by Turkey.