Recep Tayyip Erdogan may have been placing his own future on the line as he pledged to lead Turkey in fighting an “economic war of independence” against markets.
As the president forces his central bank into market-rattling interest rate cuts that defy the laws of economics, prices are soaring and the country’s currency is in freefall – along with his people’s confidence.
Fearful Turks are waving the white flag after the lira’s stunning implosion in recent days, fleeing the embattled currency after a 30pc fall since September. On Tuesday it plunged as much as 15pc alone, a drop higher than Turkey’s currency crisis of 2018.
Turks are converting their wages and savings into safer currencies – around half of deposits are held in foreign currencies – with this “dollarisation” triggering fresh plunges in the lira. But they are not rushing to the bank yet.
“The biggest question really is if depositors freak out and we see a run on banks: that’s game over,” says Tim Ash, emerging market strategist at BlueBay Asset Management.
“There’s a concern just about dollarisation generally and where does this lira weakness end. In the end we all know high inflation is ultimately not good for long term growth.”
As the president promises an economic victory, Turkey risks becoming the big loser from the global inflation shock. The lira’s slump has stoked price rises already at 20pc year-on-year.
At the start of the year, 100 Turkish lira was worth $13.50 but today it is valued at $8.17. While the lira stabilised on Wednesday, making a small 4pc rebound, analysts warn fresh weakness could be ahead.