USD/TRY was around 14.000 in 1994. In just a couple of months, it hit 42.000. After a few months, it fell back to 17.000, meaning a depreciation of 300%. This happened before the removal of six zeros from the Turkish lira.
Let’s remember the 2001 crisis. USD/TRY was standing around 670.000. A few months later, it climbed up to 1.777.000; a depreciation by approximately 265%. I had appeared as a guest on a live economy show on TV the day it hit peak levels.
Let’s take a look at the more recent examples: USD/TRY’ journey began at a level of 2.90 months after the 15 July failed coup attempt in 2016, and it ended when it hit 3,80 in February 2017. Then it fell back to 3,40. Nevertheless, Turkey has managed to achieve goods things in many areas including exports and growth despite the fact that its national currency depreciated more than 30% from base to ceiling.
And during its journey that kicked off in February 2017, TRY has faced a deprecation of slightly more than 20%, from rock-bottom to yesterday’s peak level. Don’t get me wrong, I obviously do not pray for worse. What I mean is Turkish Economy has seen worse and gone through it successfully.
Difference between back then and now…
First of all, there is a significant difference between private sector’s debt stock of the time, and private sector’s current total debt. Also, Turkey is running a huge foreign trade deficit and a huge current account deficit. We rank first among other developing countries in terms of the ratio of both external debt and current account deficit to the GDP.
There’s this “restructuring” trend among large companies lately. Initiated by companies earning high revenues yet owing massive amounts of debt, if this trend spreads to other companies who do or do not need “restructuring” , then we should better get ready to deal with challenging times.
If you’ll excuse me, I’d like to conclude my report now so I can take a closer look at the markets.