The Turkish economy is still facing new turbulence Sudden fall of the central bank governor By President Recep Tayyip Erdogan, who added another chapter to the years of unpredictable economic policy, and possibly aroused fears of foreign investors die The seeds of a financial crisis in set the horizon, according to an analysis by the American Wall Street Journal.
Last Friday, Erdogan replaced Nasi Aghbal with Shehab Qafcioglu, a former member of Erdogan’s Justice and Development Party and the He publicly advocated die Call for a rate cut by the PresidentDespite inflation at 15.6% in February.
Erdogan, the in laid off three central bank governors in less than two years, preferring low interest rates as part of a growth strategy.
He declined die Policy from Mr Abal who die Interest rates increased to die Fight inflation and help Turkey avert an economic crisis. Mr. Aghbal’s policy has die Encouraged investors to return billions of dollars since his appointment in November in the land to flow.
The Turkish lira
Aghbal’s sacking on Monday resulted in one of the worst one-day sales of Turkish lira-denominated assets since die Investors show their commitment in the currency reduced. The pound fell 7.5% against the dollar in one day. Kavcıo عى lu tried to die To pacify markets by saying he would die Curb inflation, but did not say whether or not die Interest rates would change.
Erdogan defended his policies during a speech at his party’s summit on Wednesday, saying that die No market volatility this week die strong foundations of the Turkish economy.
He added, “We have proven time and again that we can withstand all types of shock.”
Erdogan, the die Ruled as Prime Minister since 2003 and later President, Turkey oversaw years of rapid economic expansion during its first decade in power when die government in die Invested in infrastructure and adopted measures to encourage growth. Suffered for the past decade die Turkey, however, suffered from increasing instability, including popular protests against Erdogan, the influx of millions of refugees from neighboring Iraq and Syria, and terrorist attacks by ISIS and Kurdish militants.
Independently led die Adopting low interest rates and other unconventional economic policy measures through die Erdoan government at times encouraged international investors to withdraw money from Turkey because of concerns about the country’s stability.
Turkey fell in 2018 in a currency crisis following former President Trump during a dispute over an American priest detained in the country die Tariffs on steel and aluminum had doubled. At the height of the crisis, Erdogan appointed his son-in-law Berat Albayrak to head the Treasury, which die Investor concerns about the narrow circle of advisors surrounding the unqualified president increased.
The currency only stabilized after die Central bank was forced to die Raise rates to 24% in September 2018, where it stayed for about 10 months.
The rate hike for 2018 stabilized die Economy and reduced cheap credit what Turkey halfto reduce the current account deficit and create a current account surplus in in 2018 and 2019.
Balance of payments crisis
The fall of the central bank chief trusted by many foreign investors has die Fears about the balance of payments crisis aroused again since die Turkey cannot pay the value of its basic imports or its external debt. Turkey is up die Funding relied on foreign investors to fund the current account deficit.
Erdogan is unlikely to seek a bailout from the International Monetary Fund. During the 2018 crisis, government officials said the deal with the International Monetary Fund was not on Turkey’s agenda.
Investors say the most likely route for die Turkey is looking for a deal with Qatar.
Central bank instability has made it difficult for the Turkish economy to recover from a series of external shocks.
In the last few years had to die Turkey with the wars in Address Syria and Iraq, terrorist attacks and the coronavirus pandemic. The Turkish army also launched a violent coup attempt in 2016, which was unsuccessful.
Erdogan has in In recent years his influence within the Turkish state has also expanded, local opponents suppressed and rival leaders within his party marginalized. He has repeatedly rejected the advice of other Turkish officials such as Aghbal to die a more traditional approach to die Business have advocated.
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