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Investors got a glimpse at how much lira weakness Turkey is likely to tolerate.
Not much.
The average lira exchange rate built into the government's economic forecasts for the next three years, published Monday, works out to 6 per dollar in 2020, 6.4 in 2021 and 6.74 in 2022, according to Bloomberg calculations. For next year alone, that amounts to a 6% nominal depreciation.
| 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|
| GDP in Turkish liras | 4.27 trillion | 4.87 trillion | 5.48 trillion | 6.07 trillion |
| GDP in U.S. dollars | 749 billion | 812 billion | 856 billion | 900 billion |
| Average USD/TRY rate implied | 5.7 | 6 | 6.4 | 6.74 |
Considering that inflation is expected to end next year at 8.5%, according to the government's own projections, authorities appear to be penciling in a real appreciation of the currency.
The assumption among many economists after Treasury & Finance Minister Berat Albayrak's presentation was that the government is banking on an export-led recovery. That may indeed be the case, but the numbers imply authorities aren't relying on weakening the lira to get there.
The Turkish currency was poised to snap a six-day winning streak on Tuesday, weakening as much as 0.6% against the dollar to 5.6822. The lira added 2.5% in the third quarter, the biggest advance in emerging markets by a wide margin.
To contact the reporter on this story: Cagan Koc in Istanbul at ckoc2@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Dana El Baltaji at delbaltaji@bloomberg.net, Constantine Courcoulas, Paul Abelsky
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