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Peter Davis

An writer at FOMOdrive

  • Jun 19, 2023
  • 2 min read

Turkish lira and stock market collapsed after Erdogan's election

Following the Turkish presidential elections, the Turkish stock market and lira experienced a dramatic decline.

None of the presidential candidates were able to obtain the minimum of 50% of the votes required to win.

Investors were wishing for the success of the opposition candidate, who had pledged to reinstate orthodox economic practices.

On Monday, the Borsa Istanbul 100 (BIST 100), Turkey's main stock index, closed 6.1% lower.

Reports of the presidential elections in Turkey indicate that no candidate was able to secure more than 50% of the vote, prompting a second round of elections to be held on May 28th, according to RBC. The sale of shares began in response to this news.

Turkish President Erdogan failed to secure a majority in the first round of voting, receiving only 0.6% of the vote. His main opponent, Kemal Kılıçdaroğlu, garnered approximately 45% of the vote.

Tellimer, a research firm, expressed that investors who were expecting the victory of the opposition candidate Kılıçdaroglu and the return to traditional economic policy he promised were greatly let down.

Under Erdogan, the Turkish Central Bank refused to raise the key rate, keeping it well below the inflation rate in the country. However, in this case, the regulator is returning to the policy of raising the rate in order to combat inflation.

In response to the news of the presidential election results, the foreign exchange market had a negative reaction. This caused the dollar exchange rate against the Turkish lira to increase by 0.57%, bringing it up to 19.67 lira.

Since the beginning of the year, the lira has depreciated by 5%, and in the last 15 years, it has lost almost 95% of its worth due to the unorthodox economic strategies of Erdogan, which have caused rampant inflation and disruption in the currency market.

JPMorgan predicts that the Turkish lira will continue to depreciate following the presidential elections. Even if the Central Bank of Turkey increases the rate from 8.5% to 30% in the third quarter in an effort to combat inflation, the dollar is expected to reach 24-25 lira.

In April, Erdogan declared that, so long as he is in office, the rate in Turkey will not increase, but rather decrease.

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