Turkey prepares for new cabinet as lira hits record low. Turkey prepares for new cabinet as lira hits record low. After an electoral victory, President Tayyip Erdogan prepared to choose his new cabinet and economic policies, sending the lira to a record low versus the dollar on Wednesday.
The lira fell about 1.5% to a record 20.75 against the dollar on its third consecutive day of losses, bringing its year-to-date losses to nearly 10%.
Turkey’s unorthodox economic policies, which followed Erdogan’s low-rate policy, worried investors.
Whom he appoints to top economic policymaking positions and whether he would follow economic orthodoxy are now the main concerns.
This week, Erdogan met with Mehmet Simsek, a former economy chief known by investors for his traditional views, fueling concerns about a possible policy shift.
I don’t know if he’ll be the new finance minister, but any good name is crucial to signal a change in the market. “Action trumps intention,” said KNG Securities’ Cagri Kutman.
“Mehmet Simsek or a similar individual in charge is a huge move. But then the market will be curious about the economic team’s first move—would they adopt more traditional policies, do something worse, or buy time and see how it goes?”
First-quarter economic growth was strong despite southern earthquakes, soaring inflation, and a cost-of-living issue.
On Wednesday, official figures indicated that Turkey’s GDP grew 4.0% in the first quarter, beyond estimates, despite February’s earthquakes that killed over 50,000 and displaced millions.
The Turkish Statistical Institute reported that seasonally and calendar-adjusted first-quarter GDP rose 0.3%.
A Reuters poll predicted 3.9% first-quarter growth and 2.8% in 2023.
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