The Turkish economy has entered a new turbulence area. The fall of the book and the power of power over the central bank worry.
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The Turkish economy has entered a new turbulence area. Thursday, October 21, the Financial Action Group (FATF) added the country to its list of nations behind the fight against money laundering and the financing of terrorism. This decision may be heavy for a consequences for an economy, which is already bothering to attract foreign investment. To appear on the “gray” list means that the banking sector in the country in question is not reliable, which exposes investors to a risk of unlawful financing.
The announcement, Thursday, October 21, by the Central Bank (BCT) of a further decrease of 200 basis points of its key rate, from 18% to 16%, and the dipstone of the Turkish currency to Historically low levels (she traded, Friday, 9.61 pounds – about 0.86 euro – for a dollar, compared with 1.86 ten years earlier), nor is not a nature to reassure. Since the beginning of the year, the Turkish book has lost nearly 20% of its value. In fact, foreign direct investments fell to their lowest level, $ 5.7 billion (about 4.8 billion euros) in 2020, compared with $ 19 billion in 2007, when the Turkish economy was at its zenith.
Promote exports
This drop in rates was wanted by President Recep Tayyip Erdogan, who, since 2018, claimed total control over BCT, focusing on the autonomy and credibility of the institution. Support growth through credit is its primary priority. A largely shared economic consensus, it claims that low rates make it possible to curb the inflation, which, in Turkey, is one of the highest in the world, 19.6% in September, nearly four times More than the objective set in the medium term by the BCT.
The last reduction in rates, decided in September, had already resulted in a fall of more than 6% of the Turkish currency. In mid-October, President Erdogan, ulcerated by the continual decline of the currency – despite the measures taken to support it – has limited two deputy governors of the Central Bank as well as a manager of the monetary committee.
If a weak currency is likely to promote exports and therefore to benefit Conservative entrepreneurs who form the foundation of the Judician and Development Party (AKP) of Erdogan, it also has a negative impact, Turkey being very dependent on raw materials that it imports – gas, oil, coal.
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