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BRIEF SUMMARY of TURKISH ECONOMY by SOME ASPECTS FOR 2020

 

CURRENT ACCOUNT DEFICIT

When devaluation (losing of currency value) occurred the country’s export increase and import decrease. Thanks to that current account deficit (export-import) lowered. In the below chart; due to the  devaluation of Turkish Lira, the current account deficit was improved until 2020. Why this thesis  didn’t work for 2020?



Because of the covid restrictions many countries did lockdown. They closed their economy so Turkey  coldnt use its currency advantageous to export more. In addition to that, tourism income decreased because of travel restrictions and concern of people . That destroyed tourism income for 2020 and caused more worse current account deficit for Turkey.

EXCHANGE RATE

Credit impulse led to import because people tried to protect their saving with gold and other foreign exchange against high inflation. This caused the highest dollarization rate. By the way, the central bank spend over 100 million dollars to keep exchange rate in the low level rather than increase interest rate so reserves went to minus. Under these circumstances, central bank has to buy foreign exchange when exchange rate decreased. It means that the exchange rate will be high until the central bank collect sufficient reserve. 

  


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