Currency Woes in Turkey Deepen After Election Results

The local currency in Turkey has tanked following the results of a presidential election. President Recep Tayyip Erdoğan has reclaimed his position, which could spell more trouble for the economy.

The Turkish Lira has tanked to a new low following the re-election of President Erdogan. On May 30, the Lira weakened to around 20 to the U.S. dollar following a 20% slump. The Lira has already lost more than 90% of its value over the past decade. The Turkish economy has been through a number of boom-and-bust cycles amid bouts of rampant inflation.

Economic Turmoil Ahead in Turkey

The inflation rate in Turkey is currently around 44%, but it skyrocketed to 85% in October.

Commenting on the reelection of Erdogan, Danske Bank chief analyst Minna Kuusisto said, “In the absence of a U-turn in his economic policies, the risk of an acute currency crisis looms.”

Years of economic turmoil have been blamed on his unorthodox economic policies, which the opposition had pledged to reverse, reported Reuters.

Chief market strategist at Bannockburn Global FX, Marc Chandler, said that Lira’s selling pressure is not from foreign asset managers. “It’s capital trying to leave Turkey, more than foreigners selling Turkey,” he added.

Anti-crypto Erdogan won by a slim majority of 52%, with pro-crypto opposition leader Kemal Kilicdaroglu securing 48%. Erdogan, who has been in power for the past two decades, is set for another five years governing the country.

The President struck a hawkish tone after his victory. He swiped at his political opponents and committed to continuing his unorthodox economic policies. Erdogan has been vehemently against raising interest rates to suppress inflation.

The slump in currency value may drive people to store-of-value assets such as Bitcoin and gold.

Embracing Bitcoin

At the peak of its inflation woes in 2022, BeInCrypto reported on how people were embracing Bitcoin in Turkey. Volumes on the now-closed peer-to-peer platform LocalBitcoins surged in the first half of last year.

Turkey outlawed crypto payments in 2021, but that has not deterred those seeking an economic life raft as the Lira sinks.

Earlier this month, it was reported that crypto exchange OKX was planning to open an office in Turkey in the coming months.

“Türkiye is an important market for us, and we’re excited to build strong relationships with our users and contribute to the development of its crypto ecosystem,” said OKX President Hong Fang.