The lira fell to 20.70 per dollar by 0830 GMT, according to Reuters data, recording a decline of more than one percent from its level at the end of Tuesday’s trading, when it recorded 20.42 per dollar. The lira has already weakened since mid-May on the direction of economic policies after the first round of elections.
The lira has plunged more than nine percent since the beginning of the year and has lost more than 90 percent of its value over a decade, with the economy going through waves of booms and busts and bouts of high inflation.
According to a note prepared by Morgan Stanley analysts, “the Turkish currency may decline to 26 per dollar, sooner than expected earlier, to approach 28 lira per dollar by the end of this year, unless there is a change in the policies followed.” .
“We have a very pessimistic view of the Turkish lira as a result of Erdogan retaining his post after the election,” said Brendan McKenna, emerging markets economist at Wells Fargo. It is expected that the lira will reach the level of 23 pounds against the dollar by the end of the second quarter, then 25 pounds early next year.
The Turkish president adopts an “unconventional” approach in order to curb the rise in inflation rates, through low interest rates.
That approach has left markets subject to an “unpredictable” mix of regulations and private interventions, with new measures taken informally and frequently, according to Bloomberg.
On the other hand, official data showed that the Turkish economy grew by 4 percent in the first quarter of this year, slightly exceeding expectations.
The growth came despite the repercussions of the devastating earthquakes that hit the south of the country in February.
Data from the Turkish Statistical Institute showed that the gross domestic product for the first quarter increased 0.3 percent from the previous quarter on a seasonally adjusted basis and according to calendar considerations.
A Reuters poll predicted the economy would grow 3.9 percent in the first quarter. The poll also predicted a growth of 2.8 percent for the whole of 2023.
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