Turkish Lira Pulls Down Turkey’s Industrial Output By 4% In April

Turkish Lira Pulls Down Turkey’s Industrial Output Index - Turkish National Flag and Geo Shape of Turkey
Bill Cascade   NEW 20/06/2019 00:00:00 Finance

The Turkish Statistical Institute revealed on Tuesday that the Turkish Industrial output dropped by 4.0% in April and that the decline was more than the anticipated year-over-year level. The Turkish Industrial Output index has grown weaker for eight consecutive months. This performance is tied to the currency crisis that the Lira experienced last year.

Turkey’s contracting economy pulls back industrial production past expected range

Turkey's economy has been contracting for the past two quarters as indicated by the industrial production, which is used as a growth data indicator. Reuters revealed that analysts and market experts expected the industrial output to fall by roughly 2.5% in April on a year-over-year basis. However, it overshot the projected figure by a 2% margin.

USD-TRY Forex Chart

Source- the Lira’s performance against the USD

The industrial output index dropped by 1.0% on a month-by-month basis. 2019 kicked off with signs of a recovery in Turkey for the first two months. Unfortunately, March and April were characterized by more Lira weakening, which consequently weakened the Turkish industrial output.

The Turkish Lira has so far shed off almost 10% of its value this year, which adds to the 30% drop that it experienced in 2018. Last year's poor performance was mainly influenced by the uncertainty that loomed over Istambul’s mayoral elections as well as the weakening relationship between Turkey and the U.S.

Lira's situation grows to worrying levels

Although the Lira has been having a rough time lately, it did demonstrate strong performance on Tuesday morning GMT. Purchasing Managers' Index (PMI) and confidence indices data released for March and April showed that the economy would be affected by the amplified volatility that has affected the market.

"The industrial production data announced today shows the negative impact is being felt beginning in April," stated Is Investment’s research director Muammar Komurcuoglu.

Komurcuoglu also noted that the industrial production output report highlights the negative effects of the weak Lira as experienced at the start of April. Manufacturing activity in Turkey also experienced a decline in May, thus making it the 14th consecutive month of contraction in the manufacturing sector.

A recently conducted business survey revealed that low new orders and declining purchasing activities are the main reasons behind the contracting manufacturing sector in Turkey. Consumer confidence reportedly fell to the lowest recorded levels, and economic confidence also dropped by 8.5% last month.

What does the future look like for the Lira

The answer to that question may be found in a recent statement by Turkey’s President Recep Tayyip Erdoğan’s close ally known as Devlet Bahceli. He pointed out that the country needs to come up with a “new and fair” exchange rate management strategy that will be well matched with Turkey’s economy and its people.

Bahceli made the statement at an event that took place in Istanbul on Sunday. He urged the Turkish government to formulate a new currency regime that will help the country to safeguard its valuable channels and relationships.







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