- Market analysts say President Erdogan's show of strength in Libya, Syria, the vicinity of Cyprus, and the Caucasus region has hurt international investors.
- On October 23, President Erdogan confirmed that Turkey had tested the controversial S-400 missile system.
- Relations with Turkey's business ally, Russia, have also cooled due to geopolitical conflicts.
Following the Coronavirus epidemic, Turkey’s currency has depreciated by a record amount against the dollar due to Turkey’s dispute with its NATO allies. In a recent speech, Turkish President Recep Tayyip Erdogan forged bitter relations with several other countries, including France and the United States.
“France is united and Europe is united. At the next European Council, Europe will have to take decisions that will allow it to strengthen the power balance with Turkey to better defend its interests and European values,” Trade Minister Franck Riester told MPs.
Analysts attributed the rise in inflation in Turkey— 11.8% last month— and the central bank’s disagreement with raising interest rates. Raising interest rates could reduce inflation and encourage investors to buy the Turkish lira.
Market analysts say President Erdogan’s show of strength in Libya, Syria, the vicinity of Cyprus, and the Caucasus region has hurt international investors.
“The new reason behind the weakening of the Turkish lira is the geopolitical instability created with the United Arab Emirates and the United States,” said a Turkish national doing international business in an interview with Reuters.
Pyotr Mattis, an analyst at Rabo Bank in Turkey, said there was concern among Turkish businessmen that if Joe Biden wins the US presidential election, “there could be a big ban on buying S-400 (anti-aircraft) missile systems from Russia.”
The Turkish lira has lost 26% of its value this year, and Turkish authorities say they have spent more than 10 trillion lira over the past 18 months to improve the value of the currency.
On October 23, President Erdogan confirmed that Turkey had tested the controversial S-400 missile system. President Erdogan said on Sunday in response to US criticism of Turkey over its arms deal with Russia, “we stepped in for the F-35, you threatened us.”
Erdogan told a televised ruling party congress in the eastern city of Malatya, “you said, ‘Send the S-400s back to Russia.’ We are not a tribal state. We are Turkey.”
“The U.S. Department of Defense condemns in the strongest possible terms Turkey’s October 16 test of the S-400 air defense system,” the top Pentagon spokesman, Jonathan Hoffman, warned in a statement. “We have been clear and unwavering in our position: an operational S-400 system is not consistent with Turkey’s commitments as a U.S. and NATO ally.”
The largest organization in terms of trade relations with Turkey is the European Union. However, European Union leaders took the initiative to explore for gas in Cyprus. President Erdogan issued a stern warning.
A statement from the European Union (EU) said in a statement that Turkey’s recent investigations into the Eastern Mediterranean were “provocative and unilateral.”
French President Emmanuel Macron has specifically criticized the Turkish president over the incident.
On Sunday, Mr Erdogan accused the French president of abusing French Muslims, then urged the Muslim world to boycott French products.
The coronavirus has also had a negative impact on the Turkish economy. Although the level of coronavirus infection in Turkey is somewhat under control after a brief setback, the rate has risen again in recent days, as in other parts of Europe.
Turkey’s foreign exchange reserves have been hurt as hundreds of billions of dollars have been sold to stem the fall in the value of the lira. The Turkish economy is expected to contract sharply this year.
Relations with Turkey’s business ally, Russia, have also cooled due to geopolitical conflicts. Turkey and Russia are backing opposing sides in the ongoing conflicts in Libya and Syria.
Again, in the war centered on Armenian-controlled Nagorno-Karabakh, Turkey is directly supporting Azerbaijan.