Turkish finance minister sticks head above parapet, says exchange rate ‘not important’ and concedes GDP may shrink

By bne IntelIiNews August 12, 2020

Turkish Finance Minister Berat Albayrak, who was conspicuous by his absence from the media as the Turkish lira fell to a new record low at the end of last week, on August 12 shrugged off the slide in the currency.

In an interview with broadcaster CNN Turk, Albayrak, son-in-law of President Recep Tayyip Erdogan, also conceded that Turkey’s gross domestic product would this year possibly contract. He said it would show between 1% growth and 2% contraction, given the impact of the coronavirus (COVID-19) pandemic on the Turkish economy.

“The exchange rate goes down, it goes up. What is important is that Turkey manages all this volatility in a controlled way,” Albayrak said. “What is important is not the exchange rate, but whether it is competitive”.

The lira hit a record low of 7.3650 against the dollar last week, marking a fall of 19% from the end of 2019. The lira stood at 7.3222 at around 01:10 Istanbul time on August 13. Before the Albayrak interview, it was trading in the 7.28s.

As markets worry that Turkey is heading for a second balance of payments crisis within two years, the central bank is using backdoor moves to squeeze credit and stabilise the lira, but there are loud calls for it to go for a formal rate hike.

Albayrak also said Turkey would miss its budget deficit target this year and the deficit would likely be around 5-6% of GDP.

Overnight lira swap rates in the London market soared above 1,000% last week as liquidity dried up, in response to behind the scenes moves made by Erdogan officials in a bid to protect the lira. Referring to the surge in rates, Albayrak said Turkey would not supply lira to people who “speculate to increase the value of the dollar.”

“Am I to give you a weapon so you can shoot at me?” he said.

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