Finance Minister Albayrak says economy growing as lira hits record lows

Duvar English - Reuters

Treasury and Finance Minister Berat Albayrak has said that the Turkish economy is growing as the Turkish Lira weakened to a record low beyond 8.05 against the U.S. dollar on Oct. 26.

"The latest data shows that our economy has been growing," Albayrak, who is also President Recep Tayyip Erdoğan's son-in-law, said in a tweet, prompting surprise among many due to the country's tumbling lira.

Son gelen veriler ekonomimizin büyüme patikasına girmesini destekleyecek şekilde rotasında ilerlediğini gösteriyor.

Ekim ayında hizmet sektörü güven endeksi %6,4, perakende ticaret sektörü güven endeksi %1,7 arttı. Kapasite Kullanım Oranı ise %74,6'dan %74,9'a yükseldi? pic.twitter.com/CR0aYcmmMS

— Berat Albayrak (@BeratAlbayrak) October 26, 2020

The lira weakened to a record low on Oct. 26, hit by investor unease over the central bank's decision last week to keep its policy rate on hold and various sources of geopolitical concern.

Strains in ties with the United States, a row with France, a dispute between Turkey and Greece over maritime rights and the conflict in Nagorno-Karabakh have all unsettled investors.

The lira weakened more than 1% to as far as 8.0670 from a close of 7.9650 on Oct. 23 and was the worst performer among emerging market peers. It has lost 26% of its value this year and more than halved in value since end-2017.

"The rising geopolitical tensions with the U.S. and EU are new sources of pressure weakening the lira. The other main elements are the questioning of monetary policy credibility and the adequacy of the lira yield," said a local bank forex trader.

The central bank left its key rate at 10.25% on Oct. 22 and raised its late liquidity window to 14.75%, saying significant tightening in financial conditions had already been achieved after steps to contain inflation risks.

It had been expected to raise its policy rate by 175 basis points in the face of lira weakness triggered by concerns about inflation and the central bank's badly depleted FX reserves.

Attention was turning to Albayrak's participation in Citibank talks with investors on Oct. 27 and the central bank's quarterly inflation report on Oct. 28.

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The lira also hit a record low beyond 9.5 against the euro. Turkey's dollar-denominated government bonds fell as much as 1.4 cents. The main Istanbul share index dropped 1.2%.

Erdoğan confirmed on Oct. 23 Turkey had tested Russian S-400 air defence systems, which Washington says compromise NATO defences. It has threatened sanctions and last week's test prompted a furious response from the Pentagon and the State Department.

But Erdoğan struck a defiant tone on the issue of sanctions on Oct. 25, saying in a speech: "You don't know who you are dancing with. Whatever the sanctions are don't be late. Do it."

He also unleashed fierce personal criticism of France's Emmanuel Macron at the weekend, saying he had a problem with Muslims and needed mental checks - a rebuke that caused France to recall its ambassador from Ankara.

Separately, Turkey extended the seismic survey of a ship in a disputed area of the eastern Mediterranean until Nov. 4 - a move that Greece condemned on Oct. 25 as "illegal", reviving tensions between the NATO members.

Researchers say new model shows Turkish inflation almost four times official tally