Despite the ongoing TL collapse, President Erdogan refused to swerve from a mad economic experiment, which is based on the premise that a weak currency would deliver current account surpluses, which will in return reduce inflation. To the contrary, various Cabinet officials and pro-AKP media outlets are proudly publishing details of Erdogan’s “new economic model, which hall presumably deliver results “in 4-5” months, in a quote attribute to him.
Turkey reaffirmed on Friday its commitment to recent aggressive rate cuts, despite a lira plunge to record lows, with the deputy finance minister and central bank saying inflation would pass and the policy had helped boost commercial loans, writes Reuters.
The chief spokesperson for the new economic policy appears to be Deputy Finance Minister Nureddin Nebati, who took his message to Twitter and print press in the last to days.
“We need to evaluate Turkey’s economy from a bigger window, rather than a narrow perspective only taking the exchange rate as a basis,” Deputy Finance Minister Nureddin Nebati said late on Thursday on Twitter.
“Under the current market conditions, there is no issue with the policy rate being kept lower than inflation”, suggesting Central Bank of Turkey (CBRT) will press on with rate cuts.
Central Bank Governor Sahap Kavcioglu met banking sector officials on Thursday evening and discussed the rate cuts with them, saying they were working in harmony with the sector, with strong communication. read more
On Friday, the central bank said revisions in its monetary policy stance since September had started a recovery in commercial loan growth.
WATCH: Understanding Turkey’s Phenomenal Currency Collapse | Real Turkey
Nebati said easing would provide stimulus to the economy to boost employment and exports, while tackling the current account deficit. He said revenue earned from the low rates policy would be directed to key imports, such as energy and raw materials.
“The manipulative attacks waged on the Turkish Lira over our low interest rate policy will not seriously damage our economy,” he said.
“Since 2013, every time we attempted to implement our low interest rate policy, we were met with strong opposition. This time, we are determined to carry this out.”
Erdogan blamed the lira’s weakness on games he said were being played on foreign exchange and interest rates.
“We see the games being played on the exchange rate and interest rates. We came out of every struggle we entered honorably by taking a strong stance. With the help of Allah and the support of our nation, we will emerge from this economic war of independence with victory,” he said.
Erdogan has been backing the view that lower interest rates are the only way to curb inflation. He has called for stimulus to boost exports, investment and jobs.
The president also reaffirmed the government’s determination to tackle “opportunists” that are making exorbitant price hikes by trying to take advantage of the “rise in the exchange rates, which has no logical explanation, as an excuse.”
Amid stubbornly high prices, the government has blamed supermarkets and opened probes into potential exploitative pricing.
Pro-government daily Yeni Safak reported that Erdogan told his party caucus to expect the new economic policy to deliver results in 4-5 months.
He didn’t outline a Plan B in case the experiment fails. In the meantime, spooked by the new Covid-19 variant, residents and investors sold TL after 3 day hiatus, driving the dollar/TL exchange rate to 12.20 as of TST 17 pm.
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