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A Projected Inflow of Billions of Dollars to Turkey despite the Lira Crisis

: 2018-08-09

A Projected Inflow of Billions of Dollars to Turkey despite the Lira Crisis
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International Finance Institute (IFC), the largest gathering of financial institutions in the world, is expecting a capital inflow of $ 51.3 billion into Turkey in 2018.

This came at a time when the local currency fell to the lowest levels against the dollar and other foreign currencies before reducing some of its losses.

Anatolia news agency quoted the CEO of the International Finance Institute, Hang Tran, as saying that interest rates in Turkey are at an adequate level to attract investors.

He added that they believe there has been a good capital flow into the country since the beginning of the year.

Tran talked about investors' interest in interest rates set by Turkey's central bank.

Turkish financial official stressed that keeping interest rates high for long periods negatively affect economic growth.

On the other hand, the Turkish market has not stopped attracting foreign direct investment in many productive and service sectors despite the slowdown in global growth.

In 2017, for example, total foreign direct investment (FDI) entered the Turkish market at $ 7.45 billion, while the global market saw a slowdown in the inflow of global investments by 8%.

Interest Rates

Turkish President Recep Tayyip Erdogan is known as an "enemy of interest rates" and said in a speech after his election for another presidential period that he would deal with high-interest rates and inflation in addition to the deficit in current transactions.

Erdogan has always stressed that cutting interest rates would be more beneficial to the economy because it would encourage businessmen and companies to get loans, create new projects and increase production and exports.

But many foreign investors in the Turkish financial markets are opposed to this approach because it goes against traditional monetary theories that interest rates should be increased to rein in inflation.

The lira fell against the dollar on Wednesday at 5.22 liras to the dollar, shrugging off some of its gains yesterday ahead of talks between Turkish and US officials in Washington to try settling a dispute that damaged the currency.

Moreover, the lira fell 27% this year, and 5.5% on Monday, to 5.4250 lira to the dollar, recording the lowest level ever.

Analysts believe that the exchange rate of the lira is temporary and does not reflect the situation of the Turkish economy, which the government described as strong.

The Turkish economy grew last year by 7.4% to exceed the expectations of global institutions, some of which grew by more than only 2.7%.

Source: Al Jazeera Net

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