Once again Turkey finds itself in a currency crisis, In fact, the lira lost more than 40 percent of its value against the United States dollar this year, making it the worst-performing of all emerging market currencies, In November alone, the lira lost nearly 30 percent of its value against the dollar and, sinceTurkish businesses that depend on imported goods are facing higher costs because the lira value plummeting, firms pass higher input costs on to consumers, consequently leaving Turkish households, and especially lower-income ones, to grapple with higher prices for goods.
The lira’s recent troubles were triggered after Turkey’s central bank cut interest rates by a full percentage point on November 18th and signaled it would slash rates again in December, when a central bank lowers interest rates, money generally becomes less expensive to borrow, and therefore less valuable relative to other currencies, lower rates also make a country’s exports relatively less expensive and therefore more competitive compared to other nations’ goods which usually means economic growth, the problem is though, that while healthy economic growth suggests living standards should improve for Turks, unfortunately, that’s not happening because of soaring inflation.
Moreover, with elections scheduled for next year, Erdogan has vowed to keep pushing for lower borrowing costs but so far, he’s showing no signs of reversing his thinking on interest rates, or any greater tolerance of central bankers who disagree with his views, for this reason, opposition politicians have accused Erdogan of dragging the country towards the bottom line.
In addition, Erdogan has replaced the country’s finance minister after weeks of economic turmoil in which inflation soared, according to a presidential decree issued near midnight, Erdogan accepted the resignation of Lutfi Elvan and appointed his deputy, Nureddin Nebati, as the new finance minister.
Meanwhile, public discontent appears to be on the rise as last week, demonstrators protested economic policies in the largest city of Istanbul and the capital, Ankara, while the main opposition Republican People’s Party plans a rally for early elections on Saturday in the southern city of Mersin.
Because of the uncertainty over the new economic model, in which Erdogan endorsed further interest rate cuts despite soaring inflation, prompted the central bank to intervene on Wednesday to stabilize the volatile currency for the first time since 2014, at the same time unemployment figures have also been increasing, with official statistics showing one in every five young people being unemployed.
Furthermore, Economic ties between the United Arab Emirates (UAE) and Turkey are growing stronger and offer great opportunities to establish new partnerships in different fields, especially trade and investment.
Turkey and the UAE are just as good partners apparently, they’re connected by strong partnerships in almost all fields of economy, trade, and investment and an agreement was reached in the joint commission on a working plan aimed at diversifying non-oil trade and increasing trade volume in light of the current economic developments and projects in the UAE, in truth, ties between the UAE and Turkey had been strained for years over the role of Islamist groups in the tumult that followed the 2011 uprisings, as a matter of fact, the two countries supported opposing sides in Libya and have disagreed on issues including gas exploration in the eastern Mediterranean but, in a shift accelerated by the pandemic, the UAE has increasingly sought to step back from costly regional conflicts and refocus on the economy, while this is happening, Turkish President Recep Tayyip Erdoğan, whose popularity has sunk amid disenchantment over his handling of the economy, is keen to repair ties with the Gulf oil producer, potentially opening up new sources of investment.
Why is Turkey’s lira crushing, available at:
https://www.aljazeera.com/economy/2021/12/1/turkey-lira-crashing-will-currency-crisis-worsen
Turkey replaces treasury finance minister, available at:
https://www.yenisafak.com/en/economy/turkey-replaces-treasury-and-finance-minister-3585322
Turkey’s Erdogan names nebati as new finance minister as lira skids, available at:
Turkish central bank, banks discuss rates after lira tumble, available at:
Turkey Finance minister praises economy, as Lira sinks to record low, available at:
Turkey-UAE economic ties growing stronger, available at:
https://www.duvarenglish.com/turkey-uae-economic-ties-growing-stronger-emirati-minister-news-59640
By The European Institute for International Law and International Relations.
