Exchange rate rises starting to hit sectors in Turkey
When some foreign analysts predicted a couple of months ago the U.S. dollar would reach 3 Turkish Liras, their estimate was not accepted on grounds it was too exaggerated. At that time, there were also those who estimated 3.5 liras, but they were absolutely not taken into account.
This week the dollar exceeded 3 liras and it does not look as if it will go down. Short-term technical analysts predict 3.2 liras will be reached soon. Those analysts who had predicted the 3.5 lira-dollar exchange rate are now regarded as good analysts. In other words, it would not be a surprise anymore if the dollar reaches 3.5 liras.
Foreign factors indeed play a serious role in this increasing exchange rate. However, the real reason for the pessimism regarding the exchange rate is domestic developments. In other words, on one hand there is the escalation of terror and on the other hand there is the fact the government has not been formed, and in addition to those, the required decisions not being made in the economy are factors accelerating the hike in the exchange rate.
In other words, the most important reason for the movement in exchange rates is bad management. In this context, there is also the fact no coalition was formed after June 7 election and a decision was made to hold new elections on Nov. 1, as well as the Turkish Central Bank’s inability to act independently from political power and not make the decision to increase interest rates.
Including those who say the increase in the exchange rate would not affect them, the hike has reached a point where it affects everybody. Inflation comes first among the parameters it affects. The August inflation data was much higher than expected and its biggest cause was the rise in the rate. The increase in inflation is expected to accelerate in September; with this state of affairs, it would not be a surprise if inflation has double-digit figures again.
The low course of oil prices curbs the effects of the rapidly increasing exchange rate. In other words, if the oil price was $100, as it was last year, all prices would have seriously increased today starting from fuel and oil, thus the inflation figures would have reached double digits a long time ago. Prices increase rapidly due to exchange rates but publicly-owned energy enterprises, because of constantly renewed elections, cannot adjust their prices accordingly and the load on the public’s future continues to increase.
Everybody to be affected
Nobody will be exempt from the increase in the exchange rate. The bill of the exchange rate will arrive in all sectors and hit all citizens; we have started seeing the concrete effects of this.
The energy sector is the first one to be hit. Private electric distribution companies have started raising their voices, stating they are in a difficult position now that their time of payments has come because of increases in foreign exchange rates. We will soon begin hearing the same voice from major contracting firms, those which have partnered in consortiums in giant state tenders.
Private sector firms which have used loans in dollars have already put their thinking caps on for the past three to four months; soon there may be waves of bankruptcies and sales.
It is inevitable the exchange rate increase will come back and hit the banks as well, even if they do not have open positions. Even now, banks’ bad loans have seen a serious increase. In short, the foreign exchange rate disaster has begun to make its presence felt.