Turkey’s battered lira has taken a fresh dive this morning after official figures revealed the economy suffered its worst contraction since 2009 in the third quarter.
The Turkish economy shrunk by 1.8 per cent in the three months to September, far worse than the 0.3 per cent expected by economists, as the country was hit by a sharp slowdown in exports and household spending (read more here).
The lira fell as much as 1.8 per cent on the news to TRY3.5485 against the dollar – close to the all-time record lows it has already plumbed in the last two weeks.
Having been the worst performing emerging market currency in the world last month, the lira rallied in the last week following patriotic appeals from the country’s president for citizens to repatriate their foreign exchange holdings into the domestic currency.
But today’s grim numbers are likely to put fresh pressure on Turkey’s central bank which raised rates for the first time since 2014 to fight the currency slump despite facing a severe slowdown in growth.
A slowing economy could also hurt President Erdogan’s support for a key change to the constitution in an upcoming referendum which would place unprecedented hands in the office of the president.
Until recently, Mr Erdogan’s ruling AK party has delivered consistent growth, accompanied by wage increases and massive infrastructural improvements during his 14 years in power.
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