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Economists increasingly feel that Turkey’s expansionary rhetoric simply masks the perfect storm its economy is in.
The pound has lost nearly 8% against the dollar in the last quarter, and the government is sweeping the US currencies wherever it can find them. Even from private deposits, as Kyriakos Mitsotakis’s financial advisor Alexis Patelis revealed today in an interview with Vima.
“The central bank (of Turkey), in its attempt to back the Turkish pound, essentially ‘borrowed’ these deposits from commercial banks and sold them. “… Turkey is today much more vulnerable economically,” said Mr. Patelis.
This is the second currency crisis in two years, only this time it has been combined with the coronavirus that has frozen the import of tourist currency and exports.
The situation has raised the dollar from 5.8 pounds last year at that time, to 6 and 81 a quarter ago and now to 7 and 35 pounds.
The professor of International Relations and deputy of ND, Dimitris Kairidis, emphasizes that “Erdogan’s policy of low interest rates creates destabilization of the Turkish pound, which is constantly depreciating. It has approached 7.5 pounds per dollar and 9 pounds per euro “.
A similar scenario with the euro, as Turkey is about to impose financial sanctions by the European Union that could be decided at the end of September. As an indication, last year a euro cost 6.38 pounds, three months ago 7.59 and now it has risen to 8.73.
As economist Napoleón Maravegias tells SKAI, “the solution that could have been found a long time ago is to have an increase in interest rates. However, rising interest rates limit economic activity and limit growth rates. “This did not happen, with the result that high inflation continues and the devaluation of the pound continues.”
However, Fitch has already revised the outlook for the Turkish economy to negative, which means it is one step closer to downgrading the debt, which is expected to further alienate investors from the neighboring country, which it will make the situation even more difficult.
Source: skai.gr
