Will currency turmoil impact Turkish elections?

World
Europe

02:09

The lira's stumble comes a month before Turkey's parliamentary and presidential elections. Unstable financial markets might turn the tide against incumbent President Recep Tayyip Erdogan.

The collapsed Turkish lira remained under tremendous pressure despite central bank intervention on Monday. The stress came from high inflation and Erdogan's comments about taking more control of Turkey's monetary policy.

Burak Kanli, the chief economist of QNB Finansinvest said that while high inflation is the major reason but the most important is midterm inflation outlook. While some analysts also attribute the lira's slump to the strengthening US dollar and possible federal rate increases.

“It is America. They try to attract investors to take their dollar investment out of country to return to America. That’s why Turkey highly effected,” said Filiz Katman, assistant professor of Istanbul Aydin University.

However, some Turkish officials said that the lira turmoil is no coincidence, given that the country's parliamentary and presidential elections are just a month away.

Market watchers also were voicing skepticism over the timing and they pointed out that the June elections mark a critical juncture in Turkey's move from a parliamentary democracy to an executive presidency that will give Erdogan sweeping new powers.

While the skepticism noted that some "foul play" by outside forces cannot be ruled out. Others said the impact of the currency fluctuations on the June 24 elections is limited and will be over soon.