ISTANBUL, Aug, 26 (Xinhua) -- Turkey has been unable to prevent the national currency from depreciating despite measures implemented by the central bank, a predicament that highlights the plight of households worrying about rising prices.
Turkey's currency hit a fresh all-time low against the U.S. dollar on Wednesday as one dollar was traded at 7.41 against the lira, who lost 20 percent of its value since the start of this year.
Investors are worried about the risk of rising inflation along with a net capital outflow. The central bank's depleted foreign currency reserves since last year have aggravated the woes.
"The depreciation of the lira seems to be permanent now, and this is the case despite the central bank's liquidity measures," Enver Erkan, an economist at Istanbul's Tera Securities, said.
"Current efforts seemingly don't have an effect on the lira," he commented in a message to investors, stressing that the Turkish currency could further slide amid a global economic setback caused by the COVID-19 pandemic and the fear of a possible second wave of contagion.
The depreciation of the lira also adds pressure to the highly indebted corporate sector with potential insolvencies. Turkey's public and private sector debt stands around 435 billion dollars.
The central bank left its interest rates unchanged last week, risking greater volatility in the lira as the monetary institution is looking for a backdoor way of containing the currency's weakness rather than a direct hike in interest rates.
The Monetary Policy Committee held its key one-week repo rate at 8.25 percent for a third month, opting to impose backdoor liquidity measures to support the nation's troubled currency.
Turkey had already economic vulnerabilities, however, the pandemic made them worse, raising the specter of a new recession that the country was just shaking-off before the outbreak following a currency meltdown in the summer of 2018.
Turkish Treasury and Finance Minister Berat Albayrak rebuked criticism, but also acknowledged that the economy is at risk of contracting this year, in line with international predictions.
Albayrak told a Turkish television channel that this year the country's economy could shrink by up to 2 percent, while the International Monetary Fund (IMF) estimates that the Turkish economy will contract by 5 percent in 2020.
Meanwhile, Turkey's vital tourism industry is trying to pick up the pieces of the global health crisis, but revenues will be far less than last year's record amounts.
Culture and Tourism Minister Mehmet Nuri Ersoy said on private broadcaster NTV that he expected 15 million tourists in 2020 and 11 billion dollars in revenue as long as flights continue to operate. Last year Turkey welcomed 45 million visitors with 34.5 billion dollars in revenues.
Households are worried that the depreciation of the currency would mean further challenges to daily life as prices of essential goods are going up amid an expected rise of the inflation which stood at 11.8 percent year on year in July.
"I don't believe the official figures. The inflation is at least the double of what is announced. The price of everything went up last month. Anyone can see it," Yesim Ersoy, a municipal worker, told Xinhua as she was leaving a supermarket in the capital Ankara's Yildizevler neighborhood.
She showed items that she just bought for her family, four eggs, flour, and butter, claiming that their prices were hiked by 10 percent in a single month.
"I didn't receive an increase in my salary, so the burden is growing for us," she complained.
The World Bank has released in early August a report on Turkey, saying that the emerging country's economy is projected to face a difficult 2020, including an increase in poverty.
"Important sectors in the Turkish economy are highly vulnerable to COVID-19 linked economic strains, which could further lower employment, reduce labor force participation, and increase the poor population by 1.2 million in 2020," the report said.
Albayrak downplayed the depreciation of the lira in televised remarks, saying that "people in Turkey don't receive wages in American dollars," blaming foreign speculators of Turkey's financial woes.
However, experts cautioned that Turkey's imports are all in dollars and euros from the European Union, the nation's main commercial partner.
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