Roundup: Turkish lira drops to historic low amid price hikes

0 Comment(s)Print E-mail Xinhua, November 16, 2021
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ANKARA, Nov. 16 (Xinhua) -- The Turkish currency has slid to a historic low of over 10 liras against 1 U.S. dollar, and its devaluation seems far from over as it may dip further if the central bank decides on another interest rate cut on Thursday, experts said.

The currency touched the all-time low last Friday evening, passing a major psychological and symbolic mark over inflation worries in Turkey and abroad.

On Tuesday, the lira continued its dive to another record low, losing 1.17 percent and traded at 10.17 per dollar. The Turkish currency has lost over 25 percent of its value since the start of the year.

Turkey is import-reliant on energy and other goods, and amid a global uptick in energy prices along with the depreciation of lira, households are feeling the pain of repeated price hikes on most items, especially food.

"Price increases are much higher than the written inflation," according to monthly data of the official Turkish Statistical Institute, Enver Erkan, chief economist at Istanbul's Tera Securities, said in a note to investors.

He argued that this situation will further push citizens to buy dollars, euros or gold to protect their savings against high inflation which is just under 20 percent annually.

State sugar company Turkseker raised prices by 25 percent on Tuesday, another latest bad news for consumers.

Meanwhile, the lira may well slide further against foreign currencies as the central bank is expected to cut its policy rate again this week, according to specialists, continuing an easing cycle despite rising inflation.

The monetary institution has cut its benchmark policy rate by 300 basis points since September to 16 percent. It is expected to slash the rate by 50 to 100 basis points when its Monetary Policy Committee gathers on Thursday, said Erkan.

Turkish President Recep Tayyip Erdogan insists on low interest rates to boost credits and exports amid a vulnerable economy made worst by the fallout of the COVID-19 pandemic.

"Insisting on lowering interest rates, President Erdogan is seeking an unorthodox method of combating inflation ... The lira seems to be on a free fall," Yalcin Karatepe, professor of finance at Ankara University, told Xinhua.

The expert expects up to 200-basis-point interest rate cut until the end this year, a move which would further weaken the embattled currency.

"Turkish citizens are faced with growing poverty with a cycle of increasing uncertainty and risks amid rising inflation and a weakening currency," Karatepe added.

Erdogan is betting on growing exports and a robust growth rate for the year end to counter the criticism about his economic management.

"Although international institutions estimate a 9-percent growth, we think that we will reach double-digit growth figures at the end of the year," he said in Istanbul, Turkey's financial hub.

Turkey's economy grew 21.7 percent year on year in the second quarter, rebounding after a sharp slowdown a year earlier driven by COVID-19 restrictions.

However, the Turkish public seems pessimistic about the current situation and has little hope on any immediate economic improvement, according to a recent survey.

Only 15 percent of respondents thought the situation will be better in 2022, according to MetroPoll, a major survey company in Turkey. Those expecting next year to be even worse made up 69 percent.

According to the survey results, the most urgent problems of Turkey are the economy, unemployment and difficulties in making ends meet. Enditem

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