Turkish Lira On The Recovery As Swedish Krona Woes Persist

Turkish Lira On The Recovery - Turkish Lira banknotes
Bill Cascade   NEW 06/10/2019 00:00:00 Forex

Turkey's government remains optimistic about the Lira appreciation, against the dollar, over the next three years. Economic forecasts by the finance ministry indicate the government expects the country’s economy to expand by 5% next year.

Turkey's Economic Growth

The treasury and finance minister Berat Albayrak expects the economy to return to economic growth next year after a tumultuous run over the past few years. The economy has been on edge following the plunge of the Turkish Lira last year.

However, a 5% growth has caught many economists as a surprise as the economy is projected to grow by 0.5% in 2019, down from an initial projection of 2.3%. According to the finance minister, the economy should benefit from a rebalancing act that has seen inflation level coming down in recent months.

In addition to the 5%, projected economic growth, the finance minister expects inflation level to drop to 8.5% from the current 12%. Should the economic projection come true, and then the average Lira exchange rate against the dollar is expected at about 6 next year, that could rise to 6.4 in 2021 and 6.74 in 2022.

While the assumption is that the economy will mostly be driven to an increase in export, the numbers suggest that a weakening Lira could help the country achieve its economic targets.

Swedish Krona Woes

While Turkey remains optimistic about the Lira stabilizing against the dollar after a tumultuous run, traders are increasingly losing touch with Sweden's Krona. The currency has come under immense pressure in recent weeks as traders question whether the country's central bank will come through a proposed interest rate hike.

A number of research banks believe that the country could be forced to remain put or carry out an interest rate cut instead, given the developments on the global scene. A number of central banks have had to cut interest rates, some into the negative territory, in response to slowing growth and looming economic recession.

Strategists at Citigroup have warned that Riksbank could be forced to remain put on interest rates at their next policy meeting.

Their counterparts at Nordea Bank, on the other hand, have warned that a rate cut could come calling at the December meeting to help stabilize inflation levels. According to Nordea analysts there is a fair chance that the Riksbank will cut interest rates by 25 basis points before the end of the years as a way to bring inflation levels to desirable levels.

Casting doubts of a rate hike is a growing concern of poor economic data back at home. A darkening economic outlook on the global scene also arouses suspicions as to whether the central bank would be justified to carry out a rate hike.

Krona, as a result, has taken a significant hit against the dollar, losing more than 10% since the start of the year. It is currently the worst-performing currency among the basket of the ten largest currencies in the world.

 

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