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Turkey: Turkey is heading for a new currency crisis
Turkey: Turkey is heading for a new currency crisis; Turkey is heading for a new currency crisis. The crash of the lira exacerbates the problems of the
Yazar: Zack Smith
Yayınlanma: 8 Ağustos 2020 17:03
Güncellenme: 8 Kasım 2024 00:31
Turkey: Turkey is heading for a new currency crisis
Turkey is heading for a new currency crisis. The crash of the lira exacerbates the problems of the country on the Bosporus, which is already struggling with the consequences of the corona pandemic.
This is good news for holidaymakers in Turkey, but not for Turkey: The lira is plummeting, it has lost a fifth of its value against the US dollar since the beginning of the year and today fell to a new record low against the US currency. This is a big problem for the country - and it can get bigger. Because Turkey is already suffering from the corona pandemic and is in a recession. If a currency crisis is added, this will exacerbate the economic difficulties.
The depreciation of the currency means that imports into the country; which is poor in raw materials and dependent on imports; are becoming more expensive. That drives inflation; which is currently twelve percent. In addition; Turkish companies abroad are heavily in debt. The rating agency S&P estimates that more than a third of all loans were taken out in foreign currencies. Many companies therefore have a massive problem: They generate their profits in ever weaker lira and thus have to repay loans in hard currencies.
The situation is made more difficult by the corona pandemic. The important tourism industry is burdening the absence of foreign guests; who normally bring a lot of money and urgently needed foreign currency into the country. In spring 2019; tourism revenue still totalled more than eight billion dollars. But in the first half of 2020; the number of foreign visitors dropped 75 percent to 4.5 million.
The central bank is fighting the lira depreciation by throwing foreign currency on the market. This tends to support the lira; but at the same time, the currency reserves are dwindling. They recently fell from $ 81 to just $ 51 billion. Since last year the central bank and state money houses have spent more than 110 billion dollars to support the domestic currency in the foreign exchange market - with manageable success
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