The Turkish lira's fallen to a historic low of 12.49 per US dollar, and against the euro, the currency declined to a recent record low of 13.40 on Tuesday (11/23). The lira's has experienced an 11-day losing run and is currently the longest in 20 years. It has lost over a third of its value in November 2021 alone. This freefall is shattering all kinds of records due to President Recep Tayyip Erdogan's ambition in intensifying the campaign for lower interest rates, which alternately plunges the country deeper into crisis. Erdogan stated during a cabinet meeting on Monday (11/21) that the current policies are part of the "war for economic independence." Erdogan's remarks only exacerbated the slump in the lira. According to Refinitiv statistics, the lira has dropped by more than 80% this year to its worst level on record. The currency's fast depreciation raises the cost of products for regular residents, particularly Erdogan's working-class constituency, and poses concerns to the banking sector. The lira's depreciation has spurred organizations such as Societe Generale and Goldman Sachs to forecast rate rises in the first half of 2022, while some argue that the barrier may not be achieved in that time frame.
The unfortunate decline of the Turkish Lira happened as a result of Turkish President Recep Tayyip Erdogan's intensifying campaign to cut interest rates. Lower rates, Erdogan stated in Turkey's capital, Ankara, on Monday (11/22), will help boost economic growth and create jobs. Erdogan has pressured the central bank to switch to an aggressive easing cycle, claiming it will promote exports, investment, and jobs - even as inflation approaches 20% and the currency devaluation accelerates, eroding Turkey's revenues. The Turkish president promotes an outlandish notion that claims that higher interest rates lead to higher inflation. However, most economists believe Turkey would face a major problem, including rising inflation if interest rates continue to fall in the coming months. Under Erdogan's urging, the central bank lowered key interest rates from 19 percent to 15 percent in September, driving a free-fall in the lira. Within the last two years, Erdogan has replaced three central bank governors, weakening investor trust. "For investors, Erdogan's statements indicate only one thing: no one will be there for them if inflation continues to wreak havoc on their assets," Ima Sammani, an FX market analyst at Monex Europe, stated on (11/23).
The Turkish government's opposition group blamed President Recep Tayyip Erdogan for the decline in the value of the lira, which plunged 15 percent against the US dollar. Opposition politicians in the Turkish parliament consider this inflation to be leading Turkey to face the darkest "catastrophe" in history. "There has never been a disaster like this in the history of the Republic of Turkey," said opposition leader of the Republican People's Party, Kemal Kilicdaroglu on Tuesday (11/23). Inflation caused some goods and commodity prices to start to rise, prompting Turks to reconsider their monthly spending until vacation plans. Turkish netizens also expressed their complaints about the worsening inflation on social media. The topic of "we are sinking" to "the government is stepping down" is trending on Turkish Twitter. In the southeastern city of Diyarbakir, a shop owner burned counterfeit money in the street as a symbol of protest. "We can't sleep, we don't know about our future," said the protesters. Moreover, Several people who spoke to Reuters said that once they received their salaries, they immediately exchanged them for foreign currency. Previously, the weakening of the lira had occurred in 2018. However, it did not have a significant impact on the Indonesian economy. Thus, the weakening of the lira at this time is also considered not to have a major impact on the Indonesian economy.
Sources
Bloomberg
CNN Indonesia
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