US report: a profound economic crisis hits Turkey and threatens Erdogan’s throne

The currency crisis shakes the Turkish economy, threatens to fist President Recep Tayyip Erdogan In power that lasted nearly two decades, and the standard of life have seriously changed in a country that was enjoying years of growth, the Wall Street Journal rated Turkey with these phrases.

The Turkish lira hit a low record versus the dollar on Thursday after the central bank cut its benchmark interest rate by one percentage point and the currency has lost more than a third of its value since March, the worst-performing major currency in emerging markets this year so far .

The depreciation of the lira is a self-inflicted wound on Erdogan, who pushed for interest rate cuts as part of an unorthodox economic strategy he believes will encourage growth. Thursday’s rate cut was the third in three months and comes after the president fired a number of senior officials who opposed his unconventional economic view.

“It’s crazy, there is no justification for this move as there has been no justification for the rate cuts we have seen so far. quest’year, ”said Timothy Ash, an emerging market analyst at BlueBay Asset Management.

Erdogan manages monetary policy alone

Erdogan came to power as a supporter of the class media Turkey, but now faces one of the most serious challenges to his government since he first became prime minister in 2003.

According to the report, pressure on wages and the rising cost of basic goods like food, medicine and energy have eroded support for Erdogan, alienating voters who in previously supported it.

One of the townspeople said: “We are living in a catastrophe, and everything is expensive and our currency has been squashed. Our money has lost all its value. “

The president’s approval rate dropped to 38.9% in October, in 2.5 percentage points lower than the previous month, according to Turkish polling company MetroPOLL. Two of the main leaders of the Turkish opposition on Wednesday called early elections in amid growing turmoil in the economy, with the next expected in 2023.

According to statements by the Turkish opposition, “this government has no chance and the voices of its supporters are dying out day by day. They know it and we know it.”

The president argues that lower interest rates will stimulate growth, a view shared by some within his ruling Justice and Development party. Repeated interest rate cuts by the central bank have increased inflationary pressures in Turkey and the inflation rate reached almost 20% in October, according to official statistics.

Economists and investors are increasingly concerned that rapid inflation could pose risks to the economy in general, and a weak currency makes it difficult for Turkey to repay its external debt, which Ankara has to repay or roll over debts of around a quarter of its GDP over the next year.

According to the report, officials’ distrust of inflation control has motivated local residents to exchange the lira for foreign currencies, and more than half of the deposits in the Turkish banking system are held. in foreign currencies, according to central bank statistics.

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