Economists at Société Générale expect the Turkish lira to depreciate further and underperform forwards vs. the dollar. They forecast USD/TRY at 22 by end-2022.

Lira likely to remain under pressure

“We expect the weakening of the lira will continue. Inflation will very likely accelerate above 80% in the coming months. The current account is deteriorating due to the sharply worsening energy balance, and the IMF estimates this year’s current account deficit at 5.7% of GDP. The summer season may bring some relief due to the export of tourism services, but its magnitude is still uncertain given the impact of the war in Ukraine and the difficult economic situation in Russia due to sanctions.” 

Our base case sees USD/TRY at 22 at end-2022. However, the probability of a faster sell-off is increasing, notably due to the accelerating inflation and higher energy prices.”

“We recommend staying away from the TRY in this period of stress. The focus of the market will increasingly be on political and geopolitical developments ahead of the upcoming election, as well as the possibility of an early election.”