“Economic policies and the pandemic have brought fresh turbulence in the economy of Turkey”

Yesterday, the Turkish economy suffered another foreign exchange shock. Losing close to three per cent of its value against the dollar, the euro and gold in one day, the Turkish lira traded at 8.58 euro and 7.25 dollars, while a quarter gold coin rose to 817 lira. With the price of the dollar stable to a considerable extent throughout the world, the attrition of the Turkish lira against the euro has been 40 per cent in the past year, while its attrition against the dollar has been 32 per cent. The Turkish lira has diminished far more against gold. A quarter gold coin, priced at 426 lira on the same day last year, has risen by 91 per cent to surpass 817 lira.

Professor of economics Veysel Ulusoy spoke of the economy undergoing a “mini devaluation”. Prof. Ulusoy commented, “There is turbulence in financial markets. This is a turbulence over and above the turbulences we have experienced since 2018. We have lost our reserves; the central bank’s reserves are negative. On top of this, there is no production in real markets. Expectations have weakened greatly. To top it all, we have tightened the Turkish lira in financial markets to stop the exchange rate from going up a bit more. Under such circumstances, with no Turkish lira on offer people wanted to sell their shares in Turkey and get out and bought cheap dollars. This demand in a sense boosted the dollar to the seven lira level.”

Recalling that the dollar had been kept at the 6.85 level for several months with the Central Bank’s manoeuvring, Ulusoy said, “The negativity of Central Bank reserves, our weakened strength in production, the total drying up of expectations in tourism and the misbalancing of future-related investments and savings have confronted us with today’s sudden turbulence.”

“THERE IS A NEED TO GET USED TO ABOVE-SEVENS WITH THE DOLLAR”

Saying, “Every sudden rise meets with standstill and reversal but it won’t revert to the old level,” Ulusoy commented, “This is how it is with exchange rates and this is how it is with gold prices. There is now a need for people to get used to above-sevens on a dollar basis or for macro-balances or imbalances to form accordingly. What matters here is what decision makers do. I have had high expectations of the Central Bank making a statement by this time. Finance Ministry officials had to come out with fluctuation-busting forecasts. We are in such a critical period that I am of the opinion that those who expose us to shocks such as three per cent one-day rises have responsibilities. As an economic decision maker, I would have long since spoken and set things out to the people in the finest detail.”

EFFECT OF THE PANDEMIC ON GOLD

Prof. Dr. Veysel Ulusoy had the following take on the huge rise in gold prices: “There is a classic formulation. Both investors and savers greatly love to pull into a safe harbour in periods in which turbulence peaks. With talk starting of the second wave of the pandemic, the wish to pull into a safe harbour grew even stronger in the international arena. Prices went up incredibly for silver and all other precious metals. As to where this is headed, the structure is something fully related to the country’s reserves along with macro-economic balances and petrol prices or asset prices. Currently, the second wave of the pandemic is boosting precious metals and reserve currencies.”

“STOCK EXCHANGE ALL THE RAGE AMONG THE PEOPLE AND THEY WILL LOSE MOST”

Stressing that the negative yield of Turkish lira deposits and zero interest on dollars was propelling people towards the stock exchange in a “frightful” manner, Prof. Ulusoy said, “We in particular experienced a bogus wealth, a bogus increase, with the Turkey Wealth Fund buying into the stock exchange. Of course, there were those who gained, but it was a bogus gain. Now the stock exchange has lost three per cent. This loss is to the detriment of mostly small savers (the people) or those with absolutely no knowledge of the stock exchange. I can say that those who lost most were people with savings who bought into the stock exchange – I won’t say investors.” (EVRENSEL DAILY)