(Public Domain Photo)
AFP – The Turkish lira fell to another record low level against the dollar on Thursday, and the government said it would revise down its forecast for growth this year.
The lira touched 2.0839 to the dollar before climbing back to 2.0696, from 2.0580 at Wednesday’s close.
This was despite a recent switch of policy to tighten short-term interest rates and intervene on the foreign exchange market.
The lira has fallen by more than 10 percent since the beginning of the year, and stock prices have also fallen.
The main stock index in Istanbul, the BIST100, slid by 0.37 percent on Thursday to stand at 66,715.06 points, down by nearly 30 percent since talk of the shift in US monetary policy began.
Economy Minister Zafer Caglayan said that developments in the world economy and especially signals of a tightening of US monetary policy had affected the outlook for the Turkish economy.
He said that the government would have to revise its medium-term targets, hinting that the outlook for growth of the economy could fall by up to one percentage point.
The government had expected exports to total $158 billion (120 billion euros) this year, and gross domestic product to grow by 4.0 percent, Caglayan said.
“But now we have to make a revision,” he was quoted as saying by the Anatolia news agency in Tatarstan.
The government now expected growth of 3.0-4.0 percent in 2013, Caglayan said, adding that this would be a good performance.
Last year the economy grew by 2.2 percent, but this was far lower than growth rates of recent years.
“All the figures in the medium term plan including inflation will be revised,” he said.
In late July, Turkey’s central bank announced that it had raised its year-end inflation forecast to 6.2 percent in a sharp adjustment from 5.3 percent, citing the exchange rate and developments in oil prices.
Analysts say that while Turkey has been strongly affected by global monetary conditions, it has its own underlying weaknesses and notably a big deficit on its current balance of payments.
The US Federal Reserve bank has signalled that it will soon begin winding down its special programme of injecting funds to support the US economy. Some of this money went into emerging markets as investors sought better returns.
The change of climate has caused money to flow out of those markets. Turkey has been particularly hard hit.
The speed and depth of a tightening of US monetary policy on emerging markets is an important issue at the summit of G20 (Group of 20) countries which opened on Thursday in Saint Petersburg, Russia.
In July, Turkey’s central bank announced “strong” action to defend the lira. The measures included increases in the overnight interest rate, and intervention on the foreign exchange market.
The bank’s chief Erdem Basci has assured that the lira could rally to 1.92 to the dollar, or even stronger, at the end of this year, while ruling out any increases in interest rates.
The central bank on Thursday sold $50 million as it tried to stabilise the lira.
The prospect of war in neighbouring Syria is adding to uncertainty.
Turkey said it would join any international coalition against Syria even without consensus from the UN Security Council.
Turkey — the second-biggest military force in NATO — shares a 910-kilometre (560-mile) border with Syria and has taken in about 500,000 refugees from the conflict.
