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The Turkish Economy Suffers as the Country Heads to the Polls

While Turkey nears the June 24 election day, the Lira continues to tumble, growth decelerates, the trade deficit is widening, inflation is surging and the country’s sovereign debt profile deteriorates.

The lira has lost more than 10% against all major currencies since January; officially, inflation was on a double-digit 10,9% in April, but core inflation – excluding food and energy – stands at 12,2%.

Calls for a rise in interest rates to tame inflationary pressure are mounting, but the Turkish Central Bank reduced its intervention by a timid 75 basis points rise. TCB governors are due to reconvene on June 7. For years, President Erdogan has pronounced himself an enemy of interest rate rises.

Meanwhile, growth is fueled mainly by public investment, funded by expensive sovereign bond sales, amidst a deteriorating sovereign debt profile. On Thursday, Standard & Poor’s cut Turkey’s rating, which stands to lose from resurgent US interest rates, since many of its companies sit on a $228bn pile of dollarized debt.

Adding to borrowing costs, the government promised massive debt relief and welfare provisions.

In 2017 the Turkish economy grew by an impressive 7,4%, that is the fastest GDP growth among the G20 economies.

https://www.neweurope.eu/article/turkish-economy-suffers-country-heads-polls/


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