The depreciation of the Turkish lira against the dollar threatens to rob Iranian exporters off of their competitive edge in regional markets where Turkey is considered Iran’s main rival, says the head of the Trade Facilitation and Export Promotion Commission of Tehran Chamber of Commerce, Industries, Mines and Agriculture.
“We call the government into urgent action to support exporters, by providing right incentives in a timely manner,” Mohammad Lahouti was also quoted as saying by the TCCIM news portal.
Noting that lira’s depreciation will increase Turkey’s exports, he said, “The neighboring country is a tough rival for us in the region, especially in Iraq, Russia and the CIS [Commonwealth of Independent States] region. Turkey’s policy has for long been to produce goods suitable for exports, therefore they have created considerable infrastructure in this field over the years. On top of that, the Turkish government allocates export incentives to it traders in a highly efficient way.”
Lahouti stressed that the ability of Turkish traders to compete in international markets has, for years, been more than that of their Iranian counterparts.
“And now a cheaper lira will make their [Turkish exports’] end prices more affordable in destination markets,” he said.
“The Iranian rial has also experienced the same fate, yet not long after it started to depreciate, economic sanctions were reimposed … that deprived us of possible benefits of a cheaper rial.”
Lahouti called on the government to increase its support to traders.
Turmoil in Turkey’s Forex Market
Turkey's currency crisis accelerated on Friday as the lira plunged 8%, gripped by fears of an inflationary spiral brought on by President Recep Tayyip Erdogan's unorthodox plan to slash interest rates in the face of soaring prices, Reuters reported.
Business leaders issued rare public criticism of economic policies. The head of Istanbul Chamber of Industry said he had been "astonished" to watch the central bank slash rates, then sell foreign reserves to support the lira the next day.
The lira hit a record low of 17.07 to the dollar, triggering direct central bank intervention in the market - its fifth effort this month to address what it called "unhealthy" prices.
"Turmoil in markets and the level of exchange rates is worrying many companies and having a negative impact on them," Rifat Hisarciklioglu, the head of Turkey's Union of Chambers and Commodity Exchanges, said on Twitter.
Hisarciklioglu called for "urgent measures" to ensure stability and predictability in the markets.
Erdogan's decision to push through 500 basis points of monetary easing since September, including another big cut on Thursday, has sent inflation soaring above 21%. It is likely to blow through 30% next year due to ballooning import prices and an emergency hike in minimum wage, economists say.
"With Erdogan seemingly becoming more entrenched in his anti-interest rate stance, the longer the currency crisis lasts, Turkey could be beyond the point of no return," said Patrick Curran at Tellimer, describing the lira as totally disconnected from fundamentals.
The knock-on effects have been fast and painful as Turks watch their savings and earnings dissolve.
Erdogan announced a 50% hike in minimum wage to 4,250 lira ($275) per month next year. But that is expected to boost overall consumer price inflation by 3.5 to 10 percentage points.
The hike affects some six million workers but, given the sharp lira depreciation, the new minimum wage is still lower than the equivalent $380 a year earlier.
"We believe that the current mix of policies is essentially unsustainable," Maxim Rybnikov, director of sovereign ratings for the EMEA region at S&P Global Ratings, said in a webcast.
