Heading: Turkey’s economic odyssey: inflation, lira decline and strategic shifts – Central Banking

The economic situation in Turkey has been tumultuous over the past two decades, with the effects of ‘Erdoganomics’ becoming increasingly apparent. The country has been plagued by double-digit inflation, averaging over 15% and reaching as high as 80% according to Turkstat figures. This has not only weakened the autonomy of the Central Bank of the Republic of Turkey (CBRT) but has also limited its ability to influence economic policy.

One significant impact of this economic turmoil is the diminishing role of the Turkish lira as the primary currency in the country. More than 70% of deposits in the Turkish banking system are now denominated in US dollars or euros, or are otherwise linked to these currencies. This shift has further eroded the lira’s status as the de facto reference currency in Turkey.

The consequences of these economic challenges are far-reaching, affecting not only the financial stability of the country but also its strategic positioning in the global economy. As Turkey grapples with the aftermath of two decades of economic instability, the road to recovery and sustainable growth remains uncertain.