FXStreet reports that economists at Capital Economics discuss USD/TRY prospects.

“With inflation close to a peak and pressure from President Erdogan for looser monetary policy, we expect the one-week repo rate to be cut by 500bp, to 14.00%, by year-end. The rise in Turkey’s risk premia since the sacking probably has further to run which, combined with growing concerns about the inflation outlook, will keep the lira under pressure – our forecast is for the currency to weaken from 8.30/$ now to 9.50/$ by end-2021 and to 10.50/$ by end-2022. Sharp falls in the lira and high inflation will probably force the central bank to reverse course and tighten monetary policy next year.” 

“The government may provide a bit more fiscal support and there will be pressure on state banks to ramp up lending, as happened last year. Overall, though, the recovery will struggle to make headway. Our forecasts are for GDP growth of 4.8% this year and 3.3-3.8% in 2022-23.”