After the re-election of Turkish President Erdogan, the lira plummeted again. The local currency fell to an all-time low against the US dollar.
Recep Tayyip Erdogan’s victory in Turkey’s presidential election deals another blow to Lira. The national currency depreciated and fell to a record low. In turn, the dollar rose 0.6 percent on Monday and was the most expensive at 20.06 lira. The national currency had already depreciated massively before the run-off election.
Erdogan faces his third five-year term after beating challenger Kemal Kilicdaroglu. “Erdogan’s victory is no consolation for foreign investors,” said Hasnain Malik, manager at Tellimer. “Only the most optimistic would hope that he now feels politically safe enough to return to orthodox economic policies.”
Inflation and idiosyncratic interest rate policy
Turkey is in a crisis and is struggling with high inflation, which at times exceeded 85 percent last year. One reason for this is that the central bank did not raise the key interest rate in accordance with economic theory, but lowered it at Erdogan’s request.
The Turkish lira, which has already lost significant value due to Erdogan’s economic and monetary policy, has fallen by more than six percent against the dollar since the beginning of the year. In the past five years, it has fallen by around 80 percent.