Turkey’s Already Struggling Economy Faces More Headwind due to COVID-19

SourceAl Bawaba
CountryMiddle east

The recent dismissal of the central bank governor via an overnight presidential decree and the resignation of Berat Albayrak, the Turkish finance minister and son-in-law of President Recep Tayyip Erdogan, contributed to the mood of trepidation. Now investors are hoping 2021 will bring an improvement to the country’s economic outlook. Albayrak, who took the finance reins in mid-2018, has been blamed for defending the currency with foreign exchange interventions and depleting foreign reserves of the central bank with costly policy interference in the currency markets. Turkey is also running a serious current-account deficit — expected to be as much as $2.7 billion in September. Turkish state banks are reported to have sold about $100 billion in dollar reserves this year to support the currency. Inevitably, such moves by the central bank triggered a rush for dollars among individual depositors seeking a safe haven throughout 2020. Foreign currency reserves of the country reached their lowest point for the past two decades, resulting in the credit rating agency Moody’s warning in September that Turkey had “almost depleted the buffers that would allow it stave off a potential balance-of-payments crisis.” As a move to win the trust of investors following the lira’s plunge, the central bank governor was replaced ...read more...