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Turkey Avoids Recession Despite Tightening Monetary Policy

Turkey’s economy avoided a recession in the third quarter of 2023,
despite tightening monetary policy by the Central Bank of Turkey.

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Turkey’s GDP grew by 0.3% in the third quarter, compared to the second quarter, down from 3.3% in the second quarter.

On an annual basis, Turkey’s GDP grew by 5.9%, compared to 3.9% in the second quarter.

The slowdown in growth is due to several factors, including:

Tightening monetary policy, with the Central Bank of Turkey raising its key interest rate to 40% in November 2023, after raising it by around 15 percentage points during the third quarter alone.
A decline in demand for Turkish exports due to the slowdown in Europe, where Turkish import prices have risen sharply, leading to higher production costs and a decline in the ability of Turkish companies to compete in foreign markets.

Analysis:

Turkey’s avoidance of a recession in the face of tightening monetary policy is an important achievement for the Turkish government,
as it suggests that the new economic policies that were adopted after the presidential elections in May last year have begun to yield positive results.

This achievement confirms the importance of the gradual approach taken by the Central Bank of Turkey in tightening monetary policy,
as it gave Turkish companies time to adapt to changes in policy.

However, the Turkish economy still faces major challenges, including high inflation,
depreciation of the Turkish lira, and declining investor confidence.

Conclusion

Turkey’s economy avoided a recession in the third quarter of 2023,
thanks to the gradual approach taken by the Central Bank of Turkey.
Despite the major challenges facing the Turkish economy,
avoiding a recession is an important achievement for the government.

Turkey Avoids Recession Despite Tightening Monetary Policy

Turkish Lira Stability Attracts Interest Traders Amid Economic Shifts

Currently, attention is turning towards the Turkish Lira, as its unusual stability appears to be a strong attraction for interest traders seeking to profit from global market fluctuations.

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Over the past three months, the Turkish Lira experienced a record decline in its value. However, recently, signs of stability have emerged, with daily losses significantly decreasing, and the expected monthly currency volatility contracting. Economic experts believe that this stability, coinciding with the rise in Turkish bond yields, creates attractive opportunities for interest traders.

According to Emre Akcakmak, Senior Advisor at “East Capital” in Dubai, he states,
“Some investors are now reconsidering their old plans,”
pointing out that the Lira exhibits a behavior resembling a floating exchange rate system,
allowing gradual changes in the currency value.

This improvement in currency volatility provides investors with opportunities to profit from short-term Turkish bonds,
while the Lira’s value rises in real terms.
In this context, Turkish Finance Minister, Mehmet Simsek,
has indicated the government’s commitment to ensuring the long-term appreciation of the currency.

Despite Barclays Bank expecting the continued decline of the Lira, experts at Goldman Sachs believe it may experience an upward trend in the coming year, accompanied by an improvement in real interest rates.

Conclusion

Turkey has overcome recent financial challenges by adopting new economic policies aimed at attracting investors, supported by an economic team emphasizing the market’s importance and striving to regain confidence.
Despite these improvements, obstacles persist, such as the decline in foreign exchange reserves and the high inflation rate, which may raise concerns among investors.

With these shifts in Turkey’s economy, it seems that the Turkish Lira is once again attracting the interest of interest traders,
who may benefit from the new opportunities available in this evolving economic context.

Turkish Lira Stability Attracts Interest Traders Amid Economic Shifts