Desperate Erdogan urges confidence in turbulent economy

Turkish President Tayyip Erdogan attends a joint news conference with Russian President Vladimir Putin (not pictured) following talks in Moscow, Russia

Turkish President Recep Tayyip Erdogan called on international investors to have confidence in his country’s turbulent economy following the sudden firing of the Central Bank head.

In a sudden move, Erdogan sacked Central Bank Governor Naci Agbal, who was appointed only a few months ago, causing the lira to sharply slide against foreign currencies and the Istanbul stock exchange to drop amid investor concerns, reports Xinhua news agency.

“The fluctuations in the markets over the past few days do not reflect the fundamentals, dynamics, potential or the future of the economy,” Erdogan said in a live broadcast speech at a congress here of his ruling Justice and Development Party (AKP) on Wednesday.

The Turkish leader urged foreign investors to “trust Turkey’s strength and potential”, arguing that the current volatility will soon dissipate.

He also called on his fellow citizens who keep foreign currencies and gold at home to inject them in the markets by investing them in financial instruments.

Turks are increasingly buying dollars and gold to protect their declining purchasing power against high inflation.

Agbal had tried to restore monetary stability by hiking interest rates by a cumulative 875 basis points in five months, bringing the benchmark policy rate to 19 per cent.

But Erdogan has always said that he is against high interest rates, claiming that they bring high inflation.

Since March 19, the lira has lost about 10 per cent of its value against the US dollar, trading Wednesday afternoon at 7,92 lira for $1.

The ousting of Agbal came after the Central Bank announced a hike of 200 basis points in policy rate last week to fight double-digit inflation, which stands at 15.6 per cent.

Erdogan recently announced a new economic plan, vowing to prioritise the fight against the rise in consumer prices with the aim of bringing inflation back down to single digit.

The government wants to bring the annual inflation to 7 per cent by the end of 2022 as presidential and general elections are planned for 2023.

“We will grow the Turkish economy on the basis of production, employment and investment,” Erdogan said on Wednesday.

Since a currency crisis in 2018, Turkey has experienced economic and geo-strategic difficulties that have impacted the economy.

The Covid-19 pandemic exacerbated the problems.

The G20 nation’s economy expanded by 1.8 per cent year-on-year in 2020 despite the economic fallout from the pandemic.

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