Forecasting the exchange rate right now will be impossible and executives will need to watch the lira movements in the coming few weeks to see firstly where it settles and secondly if there is any major policy response coming. In the immediate term, even using scenarios will be futile to predict where the lira can land.

Regardless of the average exchange rate outlook for 2022, consumer goods companies can expect some panic buying to occur right now, but then for confidence and purchasing power to drop significantly into early next year. While price increases will be inevitable, loss of volume should be anticipated and consumer segments need to be re-sized with much lower affordability metrics. Healthcare companies will unfortunately experience extreme margin pressures, while B2B companies need to monitor receivables risk and prioritize exporting firms in their sales efforts.

This short term volatility should be considered within Turkey’s historic context where the country’s economy rebounded numerous times from severe exchange rate and inflation movements. Executives are looking at using Turkey resources for regional purposes, prioritizing financial prudence but also maintaining competitive positioning to capture the country’s long term opportunities.


The Turkish lira lost almost 70% of its value against the US dollar throughout 2021. The lira depreciation accelerated in the fall after the central bank cut interest rates various times amid rising official inflation, and widening gap between official and actual inflation. As of November 24 no major policy response had taken place against the steep loss of lira value.

The Turkish lira lost 70% of its value throughout 2021

Our View

The lira depreciation happening right now is not necessarily linked to major economic fundamentals but to a severe loss of confidence of both Turkish residents and any remaining foreign holders of TRY assets, in economic policy making. Negative real interest rates, extreme inflation and the mismatch of living cost increases with official inflation figures, combined with insistence on loose monetary policy are fueling the loss of the lira. A strong policy response can stop and partially reverse the loss of value and this policy response would not only refer to rate hikes but would have to include significant increase in authorities’ prioritization of lira stability and inflation management.

Into 2022, higher export and tourism sector earnings should support the FX reserves outlook. However, high oil prices and high import dependence of the exporting manufacturing sector will still pressure the current account deficit. Risks on the lira remain next year, with potential rise in political tensions in the lead up to elections and with talk of US FED rate hikes coming up in 2023.

Unfortunately, executives can assume a further 20–50% depreciation range throughout the year for 2022 if no policy change occurs. However, rate increases and change in policy approach can also allow the lira to regain value. The Turkish lira has appreciated anywhere between 12–20% in the last few years when authorities made announcements that had given confidence to markets. Looking at simple historical movements gives a range of TRY9.6 (the likely most optimistic) to TRY20.4 (the likely most pessimistic) scenario for next year. However, many factors can push the lira out of this range for both directions.

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