Erdoğan calls economy summit as lira hits new record low

Turkish President Recep Tayyip Erdoğan called a meeting of the country’s top economy officials for this week as the lira hit a fresh record low against the dollar on Monday.

The lira dropped to as low as 7.3952 per dollar in Istanbul and traded down 0.4 percent at 7.3932 against the U.S. currency at 11:24 a.m. local time. Losses this year total almost 20 percent.

The economy summit, one of the most comprehensive of recent years, will be attended by Treasury and Finance Minister Berat Albayrak, Vice-President Fuat Oktay and officials from organisations including the central bank, state-run banks and the banking watchdog, Milliyet newspaper reported. It did not say on which day the meeting would take place.

Turkey’s lira is plumbing fresh lows against the dollar due to concerns among investors for monetary and economic policy.

The central bank is due to meet on interest rates on Thursday, with many investors calling for a formal hike to the benchmark rate, which stand at 8.25 percent, below the rate of consumer price inflation of 11.8 percent. But Erdoğan has opposed rate increases saying they are inflationary and his government has used state-run banks to spur a lending boom to consumers and businesses.

Turkey’s economy was hit by a currency crisis in 2018, partially caused by an overheating economy. Erdoğan sacked and replaced the central bank’s governor in July last year for failing to lower interest rates, which had stood at 24 percent, to aid the government’s pro-economic growth policies.

The lending splurge has turned Turkey’s current account surplus into a deficit this year as consumers used the loans to buy up imported goods such as cars and televisions.

The current account deficit widened by $2.84 billion to $2.93 billion in June compared with the same month a year earlier, the central bank said on Friday. That increased the 12-month rolling deficit to $11.1 billion. Meanwhile, portfolio investment, which Turkey traditionally uses to help fund the deficit, registered a net outflow of $1.5 billion in June, the central bank said.

The central bank has spent tens of billions of dollars of its foreign currency reserves this year defending the lira with the help of state-run banks, which have also shorted the dollar. Its reserves fell by $7.7 billion in June alone, according to the current account figures.

Source: Ahval