https://ahvalnews.com/-Turkey’s economy may suffer the most damage globally from the emerging crisis in Ukraine, second only to Ukraine itself, said Alaattin Aktaş, a columnist for Dünya, Turkey’s leading financial daily.
Russia may be hit financially by sanctions imposed on it by the West, but oil prices may remain elevated at $100 per barrel or more, meaning vast profits from selling energy to countries in Asia. Meanwhile, the finances of Turkey, which imports almost all of its energy needs, will be hit hard at a time when inflation was already surging, Aktaş said on Wednesday.
The Turkish lira sank to successive record lows against the dollar last year, losing 44 percent of its value, after the central bank cut interest rates on President Recep Tayyip Erdoğan’s orders. The combination of lax monetary policy and surging global energy prices pushed annual inflation to a two-decade high of 48.7 percent in January.
The government says tourism revenues this year may equal or exceed the record $35 billion earned in 2019, helping to support the lira and finance the country’s current account deficit, which is driven by the cost of imported energy and other goods. But that prediction now looks unrealistic seeing as Russian and Ukrainian tourists totalled more than a quarter of all visitors in 2021, Aktaş said.
Turkey’s proximity to the conflict in Ukraine may also deter European and other Western tourists from visiting. In 2019, 39.5 million people arrived in the country for vacations. Last year, the total was 24.7 million.
Rate cuts by the central bank in the final four months of the year – the benchmark rate now stands at 14 percent compared with 19 percent at the start of September – have already led to galloping price increases. The cost of fuel has doubled in lira terms in the past five months alone, Aktaş said.
With renewed pressure on the lira – the currency lost more than 1 percent of its value against the dollar on Tuesday – it may not be long before more hikes to energy prices occur, he said.
Turkey’s medium-term economic programme, updated in October, foresaw an average lira-dollar exchange rate of 9.27 for 2022 and oil prices of $68.3 per barrel. Last month, the central bank predicted oil prices at $80.4 per barrel this year. The lira was trading at around 13.8 per dollar on Wednesday.
Aktaş said the government’s economic policies for this year – a new dollar-linked lira bank deposits scheme, bringing gold from under the mattress, a possible current account surplus, and tax exemptions – were all aimed at keeping the lira’s value against the dollar stable and slowing inflation.
But now those targets may be scuppered by President Vladimir Putin and the emerging crisis across the Black Sea, he said.