After the fluctuation of the lira, will 2022 be better for the Turkish economy?

Ankara – With the end of 2021, which was a lean year for the Turkish economy, the questions of Turks and investors escalate, as they enter the year 2022, about the interest rate, the value of the lira, the fate of inflation and prices, and what is required to address economic problems.

President Recep Tayyip Erdogan stressed – in press statements – that “2022 will be better than 2021, and we will be much stronger next year, in which we hope to achieve many different leaps,” adding, “Our goal is to reduce the current account deficit with higher production and export growth, and even the transition to current account surplus.

Al Jazeera Net asked two economic experts from Turkey to anticipate the state of the economy during 2022, and their answers were as follows:

  • Will the Turkish Central Bank continue to cut interest rates? To what percentage can it reach by the end of 2022?

Dr. Recep Yurlmaz – Professor of Economics and Finance at Yildirim Beyazit University in Ankara – expects no further rate cuts until at least the first quarter of 2022. But new interest rate cuts will come when inflation and the lira exchange rate are under control, which will become clear in the second quarter of the new year.

He says: According to the new economic model, reducing interest rates helps production, so it is expected that the interest rate will drop to less than 10% by the end of 2022.

From Istanbul, the economic analyst, Dr. Ahmed Musabeh, said that the government will not go to increase the interest at all costs, especially after President Erdogan insisted on this approach despite the US dollar reaching more than 18 lira at some point, expecting the central bank to reduce the interest rate to the limits 10% during 2022.

  • Will the Turkish lira continue to recover or fall? And to what number can the lira reach against the dollar, especially after its remarkable improvement following the announcement of the new economic model?

Turkish academic Yorulmaz says: After Erdogan’s low interest policy, we witnessed a significant decline in the value of the Turkish currency, as interest in the dollar increased, but the new economic model renewed the people’s confidence in the lira and began depositing it in banks instead of the dollar, which led to its rise and reach 11, and an expected rise Its value to 10 or 9 per dollar during the new year.

Analyst Musabih believes that under these circumstances, no one can predict the price of the lira in the future, and even the issue of recovery or deterioration depends on the government’s ability to preserve the gains achieved during the past days, not to mention that judging the efficiency of these measures takes some time.

Experts point out that it is the billions of dollars in hard currency savings held by Turkish families and local businesses that will lead to fluctuations in the lira in 2022.

Citizens owned $226 billion in foreign currency on December 3, equivalent to more than 60% of all deposits, according to the latest central bank data.

The President stressed that the exchange rates of the lira against foreign currencies will witness stability very soon, and said in his statements, “Since the announcement of the new financial program, deposits in Turkish lira have increased by more than 23.8 billion, and the increase continues.”

  • What is the fate of inflation? Will prices continue to rise or fall?

Dr. Mosbeh believes that the issue of inflation and controlling prices will be one of the biggest challenges during the coming period, especially in light of the new changes. Although the inflation rate is about 21%, what is tangible in reality is that there is inflation exceeding 50%, so it is difficult to reduce prices in light of These data and variables.

As for Dr. Yorulmaz, he believes that inflation is one of the most important problems of the Turkish macroeconomic system, and in the current period, anti-inflation statistics show that there will be price increases for a period of time, however, the increase in inflation will be inversely proportional to the value of the Turkish lira.

  • What is the government’s capabilities to curb the rise in the dollar, prices and inflation? And how will the economic problems be addressed, especially with the approach of elections in 2023?

“Sooner or later, like we lowered inflation to 4% when I came to power, we will lower it again, we will make it go down again,” President Erdoğan said during a meeting with African youths, stressing that his government is determined to prevent the exploiters from increasing consumer prices.

The government raised the minimum wage to 50%, and therefore labor costs increased by 50%, so – according to Mosbeh’s talk – it will not be easy for employers to accept lower prices, and expectations indicate a significant increase in tax loads for the new year, Especially in light of the depreciation of the lira compared to 2021.

He added, “In order for the government to impose its control over prices and inflation, it must provide a more stable environment for exchange rates, reduce the margin of fluctuations, and re-evaluate the issue of wages according to the new data, so that it matches the real situation of the market, in addition to activating greater control over prices to match the levels of inflation announced by the government. .

While Yorulmaz, who previously worked as head of the economic studies department at the Orsam Research Center, says, “Despite the appreciation of the lira, prices have not fallen in the market yet, but the movement of the lira-protected deposit system was a magic wand that prevented dollarization in the country and attacks on the national currency, and thus renewed The people’s support for the government, however, achieving price stability remains the biggest test for the government in the new year.”

He added, “The integrated use of monetary and fiscal policy tools and the solution of problems that directly affect inflation will ensure the end of 2022, and Erdogan’s entry into the elections in 2023 in an ideal way.

  • Will we witness the results of gas extraction in the Black Sea and the results of the deals concluded with many countries recently on the Turkish economy during 2022?

Researcher Mosbeh confirms that gas exploration represents a positive and pivotal point in restoring indicators and their interaction in the next stage, especially since the state’s energy bill constitutes an obstacle to the stability of the current account, but the matter remains related to the size of those discoveries reducing the size of the energy import bill.

For his part, Professor of Economics and Finance at Yildirim Beyazit University points out that the coming years will be golden for Turkey, as it will reduce its dependence in the field of energy on its regional competitors, and find an opportunity to strengthen its hand in the natural gas contracts that it will conclude in the market, and this means that the current account deficit will be closed , which is the weakest point in the country’s economy.

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