It is difficult to explain the current devaluation of the Turkish Lira against the U.S. Dollar on economic terms, as the current situation is a mere example of the global hegemon – the U.S. – exerting its political power on a so-called ally.
As the public debt level is currently very low, the Turkish government has an ample room to increase its spending level to boost the real economy.
“Ironically, this is the same era in which the rhetoric that central banks around the world gained their “independence” has become widespread. What happened actually was central banks have become dependent on the financial industry, as they were dependent on states in the Bretton Woods era.”
The Turkish economy has her own problems such as current account deficit, as other economies have their own. However, it has showed her resilience and potential time and again in the last 7 decades and particularly in the 2000s.
Ahead of the snap election in June 2018, Turkey is under a severe financial attack. It is quite apparent that Turkey’s macroeconomic indicators are quite healthy, and it is not possible to explain the current financial pressure “economically”.
“What are the ratings of credit rating agencies themselves, then? It is well below “credibility” for most people around the world, apparently. With a negative outlook. And no (upward) revision is on the horizon.”
“Time is more than ripe for the TCMB to reconsider its monetary policy stance and take into account real factors such as employment, economic growth, income inequality and, last but not least, the development process of the country when constructing monetary policy function. After all, central banks are for the people, right?”
Developing countries such as Turkey should adopt “low policy interest rate – undervalued exchange rate” regime. This regime is certainly not enough to the industrialization end, but is a must.
What’s the future prospect for the Turkish economy?
There is a general sentiment within Turkish society that volatility in the Turkish lira has its roots not in economy, but in politics, and is an economic extension to the slow motion war against Turkey waged by “subcontractor” terrorist organizations.