The Turkish lira is expected to be among the emerging market currencies hardest hit by the global economic downturn, a report by Societe Generale says.
In the short term, the pound and the currencies of other developing countries face fresh problems, according to a report by Societe Generale strategists.
The French bank said the Turkish lira was likely to fall to around 22 per dollar by the end of the year. This will push the pound’s losses this year to 39.5%. On Tuesday, the pound fell 0.5% to 17.55 per dollar, pushing the 2022 rate of losses to 24%.
The lira lost 44% of its value last year after President Recep Tayyip Erdogan ordered the central bank to cut interest rates despite strong inflationary pressures. Consumer price inflation in Turkey reached 78.6% in June this year, pushing the rate to its highest level since 1998.
Last month, Societe Generale said inflation in Turkey would peak at 80% or more in the coming months. It said interest rates would remain at 14% in the second quarter of next year and pressure from pound sellers was likely to intensify due to high inflation and energy prices.
Fitch Ratings downgraded Turkey’s sovereign debt rating to “B”, five notches below investment grade, from “B+” on July 8, citing broad concerns about the economy and galloping inflation.
“Turkey’s policy is becoming increasingly interventionist and unpredictable,” Fitch saidreferring to the latest in a series of measures introduced last month banning loans to companies believed to be backed by foreign currency cash.
Petros Kranias
Source: Capital
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