The Turkish lira plunged to record lows after the re-election of President Recep Tayyip Erdogan, a sign that currency markets are not confident in the country’s economic future after the longtime leader’s victory.
The lira weakened to 20.01 to the United States dollar on Monday after the high-stakes run-off a day earlier, during the currency’s worst trading day in eight months.
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But Turkish stocks, on the other hand, rose as Erdogan entered a third decade in power, with the benchmark BIST-100 index ending the day up 4.1 percent and the banking index closing up 2.13 percent.
The lira fell to a record low as the country battles a cost-of-living crisis and depleted foreign reserves.
On the campaign trail, Erdogan pledged to slash inflation to single digits and boost economic growth, a message he reiterated in his victory speech late on Sunday. But some analysts said his economic policies are unorthodox and predicted a negative economic outlook.
Interest rate cuts sought by Erdogan sparked a devaluation of the Turkish lira in late 2021 and sent inflation to a 24-year peak of 85.5 percent last year. The president had argued that higher interest rates cause inflation while central banks around the world were raising rates to reduce price rises.
Turkey’s struggling economy, also reeling after the country’s devastating double earthquakes in February, was a major thorn in Erdogan’s prospect for re-election.
The leader has defended his economic policies, reassuring Turks that investment, production, exports and an eventual current account surplus will drive up Turkey’s gross domestic product.