Economists Warn That Currency Turmoil Could Make Turkey’s Economy More Vulnerable In The Future.

Economists warn that currency turmoil could make Turkey’s economy more vulnerable in the future.

Istanbul, December 30, : , The Turkish President Recep Tayyip Erdan announced that he would protect the lira deposit and end panic dollarisation.
The plan of the government has been able to rescue the currency that was in serious trouble.According to the central bank of the country, the currency traded at 12.22 liras for the greenback against the dollar on Wednesday after falling to an unprecedented low of 18.35 lire per US Dollar.

 Economists Warn That Currency Turmoil Could Make Turkey’s Economy More Vul-TeluguStop.com

Economists however claim that the recent currency turmoil has made the country vulnerable to shocks in the future, particularly high inflation.

Before the policy shift the central bank had repeatedly cut interest rates, which economists believe contributed to the currency’s devaluation.The lira lost almost 60% of its value since January.However, December saw an increase in inflation to 21.3 percent.Even with the recent recovery, the currency remains significantly lower than it was in the same time period in 2020.

Turkey’s leader, Erdogan, has been firm in pushing low interest rates.He insists that this will reduce inflation.However, economists disagree with this model.

In the past two months, the collapse of the Turkish lira significantly increased the prices for essential commodities and food, lowering the household’s living standard.The Turkish government increased the minimum wage by 50% for all workers in order to address these concerns.

The economic outlook for 2022 is divided among economists.Many see Erdogan’s rescue plan as an attempt to raise the interest rate.

Mustafa Sonmez, a Turkish writer and economist, stated that the measures failed to prevent citizens from purchasing hard currency to protect their money against rising inflation.

The plan did not encourage citizens to sell hard currency.

According to figures from the Banking Regulation and Supervision Agency, $ deposits have increased by $2Billion,” he said to Xinhua.

Sonmez stated that Erdogan’s insistence on low interest rates had put serious pressure on already low foreign currency reserves at the central bank, ahead of 2022 foreign debt repayments.

Emre Alkin, an Istanbul-based finance expert, stated that the government fulfilled its promises to reverse the decline in the lira through its series of financial measures.

He said that “it seems like a portion of the population believes in this new Lira-denominated Deposit System”, refuting critics that it’s a disguised interest rate rise.

In the wake of current economic conditions and currency turmoil, he described the government’s scheme as rational.

Alkin urged the government to deal with other pressing economic problems such as high inflation, bad credit loans by banks, and public debt.

He said, “One shouldn’t think these problems can be solved on their own by only the revaluation the lira.”

In 2021, the Turkish gross domestic product will grow 9 percent.However, high inflation casts a shadow on the prospects of Turkey’s economy.

int/khz/


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