FX.co ★ Turkey’s economy in dire straits

Turkey quite often hits the headlines. Unfortunately, the reason for this is quite dolorous. President Recep Erdogan continues to shatter the once steady economy step by step. He has every chance to go down in history as the dictator who has destroyed the country's economy as inflation has jumped to 19.25%.

The current president is also widely criticized for nepotism. Erdogan gives important positions in the government to his close relatives. Besides, he replaces the governors of the central bank if they dare to disagree. As a result, the regulator is totally under the government’s control. Notably, when Erdogan took the reins, Turkey was considered a country with a steadily developing market economy, an independent central bank, etc. This was the reason why at the beginning of the presidential term, Erdogan had enough money for his questionable projects. However, the state coffers gradually became empty. Additionally, constant interference in the central bank’s activities led to a record collapse of the national currency and the highest increase in consumer prices.

The interest rate turned negative for the first time in almost a year. It somehow ruined the plans of the president, who insisted on further easing of monetary policy. The current governor of the central bank, Sahap Kavcioglu, has to sit on fences. Apparently, he needs to take steps to improve the economy. Yet, he cannot take action without Erdogan’s approval, especially on the key rate. "Further acceleration in inflation confirmed that the tightening cycle ended in March following yet another dramatic reshuffling at the CBRT," Piotr Matys, a senior currency analyst at InTouch Capital Markets Ltd, said. "The policy rate should have been higher, but Governor Kavcioglu hasn’t been appointed to keep raising it, but seemingly to prevent further hikes."