Collapsed Lira

Turkey has been dealing with the currency and debt crisis for a long time. Value of Turkish Lira USD/TRY has been in a free-fall recently, losing significant value against the dollar.

Why Turkey? Why such fall? What is the reason behind this Economic Crisis?

A Glance in tranquility wins

The Policy

The simple reason for the Turkish lira's collapse is unorthodox economic policy of keeping interest rates low to boost Turkey's economic growth and export potential with a competitive currency. For many economists, if inflation goes up you control it by raising interest rates. But Mr Erdogan sees interest rates as "an evil that make the rich richer and the poor poorer".

The Inflation Rate

Annual inflation has surged above 21% in Turkey, but the Central Bank of the Republic of Turkey, overhauled by Mr. Erdogan, has just lowered interest rates from 16% to 15%, the third cut this year. Inflation is rising around the world, and central banks are talking about hiking interest rates. But not here, because Mr. Erdogan believes ultimately inflation will fall.

Vulnerable Position

With the Turkish lira slumping to record lows and the country experiencing skyrocketing inflation, Turkey’s economy is quickly accelerating downwards. This presents a risk for the country’s President, Recep Tayyip Erdogan, whose popularity has been on the decline. Ahead of upcoming elections in 2023, the combination of a collapsing economy and the government’s plummeting support has put Erdogan in an extremely vulnerable position.

Lira Collapse 

Erdogan has stuck fast to his policies, opposing interest rate hikes -- which he calls "the mother and father of all evil" High interest rates are a drag on activity and slow down economic growth, but they are useful to tamp down inflation as they cut demand and encourage savings.

Future Plans

WikiPedia - "The finance minister of the Turkish government, Albayrak unveiled a new economic program to stave off the recent financial crisis. The three-year plan aims to "reign in inflation, spur growth and cut the current account deficit. The program is expected to lower economic growth substantially in the short term (from a previous forecast of 5.5% to 3.8% in 2018 and 2.3% in 2019) but with a gradual growth increase by 2021 towards 5%." Let the best reach to people of Turkey soon.

Hope it ignited your view on Turkey's economic crisis, Tranquility wins.