I shared my opinions with you on this very subject yesterday on YouTube. But, as a Chinese saying goes, “The faintest Ink is better than the best memory!” I’ve decided to write a two-part article on exchange rate rises. The first will cover the global causes and the second part will tell us about us.
Let’s begin with the main cause of sharp exchange rate movements. There’s no denying that the US economy will enter recession by 2021, which is included as a huge concern in Fed’s decision. Accordingly, it seems likely that Euro will start appreciating against Dollar. Let’s not, however, jump into conclusions before listen to what the analysts have to say.
Because, according to analysts, German exports and industrial production has fallen in to sharp, sudden decline, which is clearly proved by the recent statistics as well. Everyone expects German economy to enter an inevitable recession by 2019. Not good news for Turkey, especially when we’re going through a period where we need high export performance.
Don’t you say “It’s none of our business” now because Chinese economy flashes recession signs too. Generating more than 15% of world GDP, Chinese exports has declined 20% in January compared to the previous year. Any economic trouble that might occur in the US and China would definitely bring negative impacts on Turkey as well, especially with this fragile economy of ours.
“Turkey should be very careful….”
According to the OECD, IMF and World Bank, global risk perception is negatively affected by trade wars, Brexit and racial or religious terrorism. All these conflicts and terror attacks result in huge pressure on Turkey and Developing Countries.
And Turkey, on the other hand, stands out as the most fragile amongst its peers, especially considering CDS spread is still high and Turkey is still having trouble finding external financing. The fact that there is a “state of emergency” in Financial Markets and Real Markets in Turkey is frequently covered and debated in international media.
Experts say Turkey must find a total amount of funds of at least 50 billion USD, with or without an IMF aid. Despite this fact, some practices that bring concerns to foreign and domestic capital simultaneously are unfortunately put into effect.
Before we start looking for dark forces lurking behind the exchange rate rise, we should first notice the steps that are being taken by the administration and their side effects. Tomorrow, I’ll provide you with a deeper insight into the causes of this sudden increase that emerged on Friday last week.