A deterioration in the economy … and warnings of central bank subjugation to Erdogan

The Turkish lira continues to fall, posting a decline that reached its lowest level on Tuesday, confirming the correctness of its classification as an emerging market currency with the worst performance in 2021.

It lost about four percent of its value to reach 10.36 against the dollar, but it came back and made up for a small portion of its losses. in view of an upcoming Turkish Central Bank meeting tomorrow, Thursday, during which it is expected that it will be decided to cut interest rates for the third consecutive month.

pressure from Erdogan

As for the motivations, many financial analysts attribute the economic policies pursued by Turkish President Recep Tayyip Erdogan, as well as the submission of the Central Bank, albeit theoretically independent, to Erdogan’s constant pressure to reduce the costs of doing business in order to stimulate growth.

While these policies have set the Turkish economy on the path of achieving 10 percent economic expansion questin turn, they raised the annual inflation rate to around 20 percent, while the lira lost more than a quarter of its value against the dollar. quest’year.

In this context, Jason Tavi, analyst of the Capital Economics Center for economic research, he felt, in a statement to the AFP, that “there are growing risks that the Central Bank’s continued acquiescence to Erdogan’s pressure in terms of lower interest rates lead to a significant and uncontrolled deterioration of the currency in the coming days and weeks. “”.

To win a second term

In turn, emerging markets expert Timothy Ashe said that Erdogan, whose popularity dropped to near lows during his 19 years in power, decided to achieve rapid economic expansion at any cost that would help him. to win a new presidential term in the elections in program for 2023.

In a note to customers, Asch said: “It’s interesting that the team of Erdogan believes that growth and job creation, not lowering inflation, will help him win the next election. “

Interestingly, the country’s economic situation has launched a wave of criticism of the policy pursued by the Turkish president. Opposition parties have more than once launched harsh criticism of Erdogan and his party, accusing him of the deterioration of the country’s economic conditions.

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