The Turkish Lira, which has survived three major interest rate cuts since the end of June, also endured the impact of CBT President being dismissed and the risk provoking US sanctions due to military operations in northern Syria.
The lira, which almost survived the Central Bank's Thursday's rate cut almost “uninjured rose by about 0.3 percent in the second half of the year like with other emerging market currencies. As the CBRT cut interest rates by 250 basis points, the total cost of funding decreased by 10 points.
TL has gained 0.3 percent since the end of June, making it the fifth best performing currency among the 24 emerging markets.
The next steps to come from the Central Bank are expected to be of major importance. Although Thursday's cut pulled down inflation-adjusted interest rate to 4.7 percent, it is still considered to be higher than other emerging markets. However, it is necessary to monitor whether TL maintains the real interest advantage due to interest rate cuts or a possible increase in inflation.
All in all despite all major blows to the Turkish economy the administration seems to be in control and now that the conflict in Syria seems to near the end the government can afford to focus on domestic issues much more powerfully.
It goes without saying Turkey is one of the rare countries in the world with a huge potential of growth despite the fact it lacks traditional energy resources such as oil. On the other hand the country has great prospects regarding use of alternative energy resources such as wind and solar. In fact, once these alternatives are put into use by the government Turkey will be far less dependent on oil thus making it possible to see a much better balanced budget and a faster growth.
