Turkey Lira has more than 15% of the US dollar this year, and the government is doing so that it can stop this flow. The Turkish Central Bank has raised the interest rate of the country by 1.25% points (17.75%) to stabilize Lera and prevent infrastructure. It has increased an emergency rate on May 23 of three percent points.
With the election on the horizons, it is an attempt to make a Turkey economy – despite the fact that in 2017 the country’s GDP increased an effective 7.4 percent. so what’s up?
There are currently two sets of turkey facing Turkey. The first is the change in international financial markets and the second from domestic politics. Domestic economic conditions constantly worsen, the continuation of these two new set of difficulties, unlike each other with Turkish policy makers, is an incredible challenge against anyone else since the early 2000s.
During the 2009 Global Financial Crisis, emerging markets like Turkey, were happily happening. In response to crisis, dramatic fall in interest rates in the US, UK and Eurozone pushes a lot of investment in emerging economies in search of higher production. To this extent the interest rates in the low-zero world produced for a long period of time, and the emerging market Bonanza allows for a long time.
Easy money, this trend of money is now increasingly increasing by the US interest rates, following the economic growth of the world, after changing investment flow in developing countries. Naturally, the balance of an economy on foreign finances, the result of the money to leave the worst country. So Turkey, with its current current account deficit and external finance, is one of the most dangerous economies due to the hardening of the international financial market.
A delightful moment arises
Turkey’s second headache is political and April 18 election election announcements will be held on June 24. This is more than just another set option. They represent a gentle moment – for the first time the voter executive will have the opportunity to vote.
According to a referendum in 2017, in which voters voted, for a little bit, to end the current parliamentary system in favor of the presidential government. The new government will be a particularly suitable one with a armed force with a armed force.
On the scale of changes offered in the government, uncertainty arising from the next elections is enough and there are huge effects. With the highest risk in the election, the government has made a huge selection package, plus addition to public financing.
This is a well-known principle in financial markets that the maximum financial requirements of the lender, the maximum premium-interest rate – is essential in maintaining funds. When combined with a political threat, especially related to international debt, the result is that debt is even more expensive. Therefore, for some time, Turkey has presented a significant interest rate to its lenders.
It is not surprising that Turkey has passed its lowest price compared to May in comparison to Lira May, according to Rajip Tayyip Erdogan’s comments, “interest rates are the mother of all mother and all evil” and “The main role in financial policy making”, if selected June 24.
The president also told his long-standing approach that “interest rate should be reduced” instead of infrastructure – which is currently running 12 percent.
The central bank has worked to control the loss, as well as the interest rate of two sets increases in several weeks. But Turkey’s challenge is far better than currency markets. It is under the country’s emergency rules after the attempt of a revolt in July, July 2016. This allows the President to rule the rule and officially under the decree of the parliament.
Meanwhile, Turkey’s economy is weak. The solid development of 2017 has largely encouraged, which is clearly unstable. Now there is a great evidence that when it was running, the cheap credit that did not run due to the use of it. At the same time, it has largely raised the burden of private debt of the private sector, and makes the country weaker than the currency prices increase.
The most important thing is, the formation of a new government – in which the President’s power has to be overcome – the separation of power, the rule of law, and the seriousness of the independence of the country’s institutions.
Extreme instability in currency markets, which threatens interference with President Bank’s central bank, clearly shows that the value of a man’s ruler can be very high to pay for the country.