Turkey’s lira tumbled nearly 1% on Friday as coronavirus cases surge and analysts predicted very little growth this year for an economy to be hit by months of disruptions to trade, tourism, and domestic demand.
The lira <TRYTOM=D3> weakened to 6.454 against the dollar at 1011 GMT, compared to Thursday’s close of 6.4. Though one of the more durable among peers, the currency has fallen about 8% this year amid a global selloff sparked by the pandemic.
The trade minister said activity would fall in the months ahead and noted exports to Iraq were already down 50% while exports to Iran – among the hardest-hit countries – had plunged 80% since the outbreak hit the Middle East.
Turkey would be hardest hit among emerging markets in the Group of 20 major economies with its growth contracting by a cumulative 7% rate in the second and third quarters, Moody’s Ratings said this week.
Fitch Ratings said the country’s BB- credit profile was imperiled and there were “large downside risks” to what was supposed to be a 2020 growth rate of about 3.5%.
The coronavirus, which is expected to spark a global recession, has infected 3,629 people in Turkey after a two-week surge that outstripped rates in most other countries. The government is struggling to ramp up testing and has closed schools, cafes and bars, banned mass prayers, and suspended flights.
Ankara’s $15 billion packages of support slashed taxes for hard-hit sectors and unlocked some funding for workers, while the central bank has flooded the financial sector with cheap lira liquidity.
Turkish Presidency spokesperson Fahrettin Altun said swap agreements between major central banks should be enlarged to all G20 nations. “No country can overcome this challenge on its own,” he said on Twitter.
Istanbul’s main share index <.XU100> was off 1.4% on Friday, resuming a slide since mid-February after it logged two days of gains in the last three.
Last week, Goldman Sachs slashed its 2020 forecast for Turkish growth to -0.2% from 3.6%, while Deutsche Bank cut it to 1% from 3.4%. The government had targeted a 5% growth this year.
The coronavirus shock comes as Turkey’s economy was beginning to rebound strongly from a recession caused by a 2018 currency crisis.
Still, the lira has fallen the least among EM peers in the recent global selloff. Economists say this is due to ongoing state bank interventions and also cheap energy prices.
Rabobank said the “bleak prospects” for the economy should keep the lira on a longer-term trajectory toward 6.8427, to where it tumbled during the 2018 crisis.