I don't care about exchange rates, Finance Minister says on plunging Turkish Lira

Duvar English

Turkish Treasury and Finance Minister Berat Albayrak has said that he doesn't care about exchange rates and that he doesn't follow them, as the Turkish Lira plumbed to new lows on Sept. 29.

"For me, the exchange rates are not important at all. I don't look at that," Albayrak, who is also President Recep Tayyip Erdoğan's son-in-law, told reporters when asked to comment on the plunging lira.

Albayrak's comments came after he unveiled the country's new economic program for 2021-2023 based on themes of "new stabilization, new normal, and the new economy."

Albayrak said the Turkish economy is projected to grow 0.3 percent this year.

The economic growth is expected to hover around 5 percent in 2022 and 2023, and to reach 5.8 percent in 2021 after deferred consumption and investments put into use and tourism revenues normalize.

"To reach our growth targets, we will focus on exports, value-added production, and employment as we've always done," Albayrak said.

The unemployment rate is projected to reach 13.8 percent this year and 12.9 percent next year, according to the program.

Albayrak said the unemployment rate will gradually drop to 10.9 percent by 2023.

The government will implement policies for economic recovery during the post-pandemic period to support the labor market, he said.

Pointing to the importance of reducing inflation permanently to single digits for setting price stability, Albayrak said the program targeted a 10.5 percent inflation rate for this year.

"Inflation rate is forecast to stand at 8 percent by the end of 2021, and drop to 4.9 percent by the end of the program," he said.

Economic data "points to a strong V-type recovery in the economy from the third quarter and a clear turn to positive growth figures," Albayrak said, adding Turkey was diverging positively from economies of many developed and developing countries.

But areas such as tourism, transport and the services sector generally had not yet recovered to the desired level. "It is of vital importance to revitalise the services sector which employs around 15 million of our people," he said.

Referring to recent steps taken on interest rates, liquidity, swaps and asset ratios, Albayrak said: "Normalization steps will continue in the coming days and weeks. They will contribute to financial stability and our macroeconomic goals."

Support packages to combat the coronavirus so far had amounted to 494 billion lira ($63 billion), or 10% of gross domestic product, he said.

Gold imports and losses in tourism income due to the coronavirus lockdown prevented a current account surplus in 2020, but Turkey aimed to improve its current account balance and provide sustainable growth, he said.

The programme forecast a current account deficit of $24.4 billion, or 3.5 percent of GDP this year. The budget deficit was seen at 239.2 billion lira, or 4.9 percent of GDP.

His presentation had little immediate impact on the lira. On Sept. 29 the lira tumbled to 7.85 against the dollar, slumping for a third straight session and erasing gains from late last week following a surprise interest rate hike by the central bank.

The lira, which has lost half its value since a full-blown currency crisis in 2018, has been hammered this year by worries around Turkey's depleted forex reserves and negative real interest rates, which, analysts said, the central bank's move last week would do little to abate.

"A deteriorating trend in FX reserves has been intact since years and was also a trigger for the start of the lira crisis in 2018," analysts at Commerzbank said.

"Last week's rate hike could have made a difference, but only if it could be reliably interpreted to be permanent and repeatable – but, it cannot."