Devaluation in Turkey: the lira has reached a new historical low against the dollar and euro

Turkish lira and US dollar bills in this illustration taken on March 10, 2023. REUTERS/Dado Ruvic/Illustration/File

Turkish lira celebrated this Thursday new all-time low against the US dollar and euro when exchanged at more than 30 units per dollar, while the European currency sells for 33.09 lira.

Depreciation of the lira, which has already lost about thirty% its value, and in 2022 more 40%the Turkish economic press attributes this increased demand for dollars on world markets and ongoing political uncertainty in Turkey.

Ten years ago, in January 2014, the lira was trading at 2.2 units per dollar.

Analysts also warn that the depreciation of the lira could lead to increase inflationwhich already ended higher in 2023 64% and this poses a big problem for the country.

Turkey has consistently recorded double-digit inflation since late 2019, and the central bank has used rate hikes in the past six months to try to control rising prices.

A man looks at the window of a butcher shop in Ankara, Türkiye. February 16, 2022 REUTERS/Cagla Gurdogan/File

The Central Bank set the inflation rate at the level of 2024 36% although many economists doubt that this figure will be achieved.

Turkey’s inflation rate rose to 64.77% on an annual basis, which is 2.79 points more than in the previous month (61.98%), which closed 2023 in highest level for the whole yearThis was reported last week by the Turkish State Institute of Statistics (Türkstat).

The hotel and restaurant sector was primarily responsible for the strong overall price growth. 93.2%and the smallest increase was 40.4%in the housing sector.

Annual price growth accelerated in December, contrasting with the month-on-month slowdown that analysts attribute to the early effects of monetary tightening that began in June.

Compared to November, the consumer price index (CPI) increased by 2.93%which is less than the monthly increase recorded this month by 3.28% (compared to October).

A store in a bazaar in Istanbul, Türkiye, in a file photo. EFE/EPA/SEDAT SUNA

The interannual inflation rate in December was equal to the inflation rate in December. 65% predicted by the Central Bank of Turkey.

On the other hand, analysts agree that increasing the minimum wage by 49% Starting January 1, 2024, announced by the Turkish government on December 27, will mean a further increase in inflation.

Civil servants and pensioners will receive an increase to their income in the amount of 31.5%calculated on the basis of average inflation for the last six months of last year, which amounted to 37.5%.

Opposition parties accuse the government of deliberately declaring the inflation rate below the real one so that wages do not have to be raised so much.

Official year-on-year inflation data released Turkstat much lower than 127% calculated by ENAG, an independent group of scientists and economists.

(According to EFE)

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