The Turkish currency dropped precipitously to a record low of 26.5 lira to the dollar Monday before rising slightly and stabilizing Tuesday morning. Overall, the Turkish lira is down 28% this year against the dollar. Most of that drop came after the May 2023 reelection of Turkish President Recep Tayyip Erdoğan. The Turkish ruler’s unorthodox economic policies helped prompt dramatic growth in 2021 but also led to a crippling inflation rate of over 70% in 2022. Inflation is expected to fall this year, however.
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In the past, Erdogan has rejected orthodox economic ideas such as raising interest rates to curb inflation and has forced the country’s central bank to combat pressure on the lira by deploying Turkey’s foreign exchange reserves.
Since his recent reelection, however, the Turkish president has signaled a new willingness to entertain more conventional policy ideas, including an easing of the central bank’s efforts to prop up the lira. This new approach has contributed to the drop in the value of the Turkish currency.