Turkey's lira drops in anticipation of presidential vote outcome

By Al Mayadeen English
Source: Al Mayadeent Net
15 May 2023 00:52

The currency recovers some of its losses but remains at risk of further devaluation after the elections.

Turkish lira banknote seen placed on US Dollar banknotes in this illustration taken, November 28, 2021 (Reuters)

The Turkish Lira dipped on Sunday to a two-month low as the country's citizens made their way to voting centers to choose Turkey's next president.

Before rebounding to 19.66 and making up some of the losses, the currency dropped to 19.70 during the day, not far from the post-earthquake rate of 19.80 recorded in early March.

After a strong vote count rally that put President Recep Tayyip Erdogan ahead of his main presidential rival Kemal Kilicdaroglu, the latest updates suggest that the competing parties might not clear a 50% win, leading the way to a runoff election scheduled on May 28.

Parties of both incumbent Tayyip Erdogan and opposition rival Kemal Kilicdaroglu were claiming the lead, but sources in both camps admitted they may not clear the 50% threshold to win outright.

The elections are considered the most important in the Republic's 100-year history, whereby Turkey is set at a crossroads. Erdogan's claim for a new term of the presidency is contended by Kilicdaroglu who aims to pivot Turkey toward a more secular Westernized course.

Hundreds of supervisors were reportedly deployed to the 50,000 polling stations since 8 am this morning.

In addition to the observers appointed by the parties, the Council of Europe sent 350 supervisors to oversee the election process.

#Turkey has long suffered from surging inflation due to the government's controversial economic policy, placing the country before a great challenge during the current elections.

Will the outcome of these elections change the course of Turkey's economy? pic.twitter.com/T2deflR116
— Al Mayadeen English (@MayadeenEnglish) May 14, 2023

"It is hard to foresee a market-positive scenario emerging from today’s double vote in Turkey," Wolfgango Piccoli, co-founder and president of Teneo consultancy, wrote to the firm's clients as reported by Reuters.

American financial giant JPMorgan forecasted in the past few days that the Turkish Lira is set to sharply drop after the elections and continue plummeting to reach a 50% devaluation in the next 12 months and land a 24-25 against the US dollar.

Almost 95% of the lira's value was lost over the last 10 years.

When Erdogan took office 20 years ago, Turkey’s economy was barely just recovering from the 2001 economic crisis but quickly spiraled upward into growth by tackling poverty and reaching upper-middle-income status, per the World Bank.

The country's GDP per capita jumped from $3,600 when he took office to approximately $12,600 ten years later, but it took a turn for the worst when it started plunging downwards, especially following the Covid-19 pandemic, US sanctions, the global economic collapse, and the devastating February 6 earthquakes.