Erdogan's Re-election... Turkish Lira Hits All-Time Low Against Dollar

Recep Tayyip Erdogan, President of Turkiye, secured re-election on the 28th (local time), while the value of the lira is moving near an all-time low against the dollar.

The lira is currently trading slightly above 20.00 lira against the dollar. This is similar to the all-time low of 20.06 lira recorded on the 26th.

The value of the lira has fallen about 6% against the dollar since the beginning of the year. Turkiye's economy has fluctuated between boom and bust, and amid massive inflation (85% as of last October) and a foreign exchange crisis, the lira has depreciated by more than 90% over the past decade. This is the result of President Erdogan's unorthodox economic policies, including low interest rate policies and interventions in the central bank.

Tim Ash of BlueBay Asset Management explained, "The current situation is unsustainable," adding, "With limited foreign exchange reserves and a huge negative real interest rate, pressure on the lira is significant."

Given that Turkiye's economy is on the brink of collapse, Erdogan's re-election is a result that overturned pre-election expectations. After Erdogan unexpectedly performed well in the first round of voting, global markets sold off Turkiye's government bonds and the lira, causing bond prices and the lira's value to fall.

In his victory speech, President Erdogan said that solving inflation is an urgent issue, but since the benchmark interest rate has fallen from 19% to 8.5% over the past two years, the inflation rate will also stabilize. However, foreign media reported that experts are skeptical about the possibility of Erdogan, who has adhered to unorthodox economic policies, making major revisions to economic policy.

Wolfango Piccoli, co-CEO of advisory firm Teneo, said, "Erdogan does not seem likely to adopt orthodox economic methods," but added, "However, ahead of the local elections in March 2024, he may adopt some adjustments to the current unorthodox approach to buy time."

This content was produced with the assistance of AI translation services.