A European country, an Asian country, a Middle Eastern country, a Balkan country, a Caucasian country, a Black Sea country, all-inclusive so to say. We are here to talk about the former Osman empire, currently known as Turkey, whose economy is (spoiler alert!) in tatters. The following material contains scenes of economic collapse – viewer discretion is advised.

“Turkish Lira Hits New Record Low…” – how many times throughout the year have you seen this title? TRY has lost 30% year-to-date (YTD) against the US dollar due to the unconventional policy on addressing inflation utilized by CBRT. But we’ll get to that later. Let’s try to work out what’s happening.

The ongoing financial and economic crisis in Turkey started way back in 2018. It’s characterized by the lira plunging in value against most major global currencies, accelerating inflation, and rising borrowing costs.

The crisis is guided by excessive account deficit, meaning the country imports more than it exports, has large amounts of private foreign-currency denominated debt, and of course unorthodox ideas about interest rate policy set forth by the Turkish president.

While rapidly growing economies use interest rate hikes to increase the cost of borrowing money and reduce economic activity, Turkey has been keeping its interest rate very low, putting the economy in a difficult position.

Investment inflows had already been declining in the period leading up to the crisis due to constant disagreements with the political establishments of Germany, France, and the Netherlands which were accused of being involved in the 2016 coup attempt and whose assets were seized. Political instability in Turkey led to cutbacks in funding from foreign companies.


Over the past decade, Turkish economy has been steadily going downward. Throughout this long period of time, the government has run a range of different economic policies, most of which were inconsistent with one another. The transition to a presidential system has had a devastating impact on the country’s economic institutions and administration.

The lack of consistency, continuous uncertainty, and repeated mistakes have resulted in the credibility gap between the authorities and all main types of economic agents, namely domestic and foreign, individuals and companies. Turkey’s current economic situation is dire. The country is heavily indebted to international investors

The Turkish lira started 2024 at around 13.35 against the US dollar and steadily declined in value through the year. Its rate fell to 18.63 in December.

Judging by the chart above, one may assume that the currency has stabilized since early October 2024. Not without reason – the country’s central bank adopted around 100 new regulations in the lead-up to the next-year elections.

In order to stay up to date with regulator announcements, most traders follow the economic calendar which gives an opportunity to be in the loop and prep for further market moves.


The value of lira is weakening at a time of particular strength in the value of the US dollar.
Things are turning sour over the matter of rising prices for energy and other commodities driven by the Russia-Ukraine conflict leading to the cost of importing goods ticking upwards, which worsens inflation.

For years, Turkey has struggled with inflationary pressure. However, due to stubbornly high energy costs, supply shocks to food and agricultural commodity prices, economic inflation reached new highs in 2024.

The skyrocketing prices have political implications for Erdoğan, as rising living costs have undermined public support for the president. And when we say skyrocketing, we actually mean it.

You be the judge – inflation in Turkey has reached 85%, food prices are 99% higher, housing has increased by 85% and transport is up 117% at the same time as the lira being significantly devalued. The standard of living of everyday Turkish citizens has plummeted.

Turkey’s youth — in particular well-educated young people — are looking for the opportunities to carve out their lives abroad. The fall of the lira has also impoverished the citizens of northern Syria, who use the Turkish currency for everyday transactions.

The economic situation is growing more severe for those inside the country. Turks will likely continue to struggle as their basic living costs rise, and Russia’s ongoing war in Ukraine has dramatically worsened price inflation on goods and energy globally.

At the same time, we should not forget that Turkey is one of the most attractive holiday destinations for people. Can tourism ease the pressure on the Turkish economy?


Tourism makes up about 13% of Turkey’s overall economy. Before the coronavirus pandemic, in 2019 tourism brought $34bn into Turkey. According to the World Trade Organization, the country was the sixth-most popular tourist destination in 2019.

And though lockdowns and travel restrictions made a hole in the sector in 2020, it bounced back in 2024. However, the revenue was still a three times lower than it was in the pre-COVID-19 world. If the industry continues to recover as travel restrictions continue to ease, it could provide wider economic benefits for Turkey.

More tourism revenue can help reduce current account deficit, which the core problem of the Turkish economy. And believe it or not, according to the latest data, Turkish tourism takes current account gap to its lowest level in 2024. In addition to unexpectedly rapid growth of budget revenues from tourism, inflation has slowed down and the country’s got its foreign currency reserves refilled.

What will happen to the USD/TRY pair in the future? The ‘lira-ization’ of the economy launched by the central bank has stabilized the exchange rate.

But in our opinion, this is a short-term fix as converting FX deposits to lira deposits and forcing the conversion of export earnings does not help with the divisive monetary policy which the central bank utilizes. With the account deficit growth and an inflation rate of over 80%, analysts anticipate further weakness in the value of the Turkish lira.

Before trading or investing, you should always do your own research. Keep in mind that past performance is not a reliable predictor of future outcomes. Also, never trade with money you can’t afford to lose.