The ongoing financial crisis in Turkey worsened on Friday as the Istanbul stock market was twice forced to suspend trading activity while the value of the Turkish lira continued plummeting.
What Happened: The Wall Street Journal reported the country’s Borsa Istanbul 100 index dropped by 8.5% on Friday, its greatest decline since March. The index’s tumble set off two circuit breakers that caused all trading to temporarily halt.
At the same time, the lira lost as much as 8% of its value against the U.S. dollar. This downfall came after Thursday’s decision by Turkey’s central bank to cut interest rates, an acquiescence to the demands by President Recep Tayyip Erdogan, who believes lower rates will stimulate his country’s economy.
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What Happens Next: Turkey had become Europe’s most troubled economy, with inflation reaching more than 21% last month. The lira lost more than half its purchasing power against the dollar over the course of this year, which a higher level of evaporation occurring over the past month.
When or how the situation can be corrected is anyone’s guess. Erdogan has fired several central bank governors and government officials who’ve disagreed with his economic strategies, which include a new mission announced Thursday to raise the minimum wage.
“The upheaval in the markets and the level that foreign currencies reached worries many of our companies and affect them negatively,” said Rifat Hisarciklioglu, president of the Union of Chambers and Commodity Exchanges of Turkey, to the Wall Street Journal.
Photo: Sally Wynn / Pixabay
