Full Breakdown
Turkey May Accelerate Lira Depreciation to Boost Export Competitiveness
7/21/2026, 12:03:43 PM
Policy Shift Expected for the Lira
Goldman Sachs economists Clemens Grafe and Basak Edizgil argue that Ankara is likely to permit a faster slide of the Turkish lira in order to improve the balance of payments, even if this slows the disinflation process. The analysts say the central bank would need to keep policy rates above market levels to preserve recent de-dollarisation gains.
Export Performance and Current-Account Pressures
Real export volumes stayed essentially flat from 2022 through 2024 and fell in the latter half of 2024, widening Turkey’s current-account deficit. Goldman Sachs projects the gap will reach 3.5 % of GDP—about $60 billion—by 2026. Competition from Chinese intermediate-goods suppliers and Central- and Eastern-European producers has eroded Turkey’s traditional export advantages, while gains in capital-goods and defence sales have not offset the decline.
Official Statements & Responses
Grafe and Edizgil note that a “more rapid rate of depreciation implies that interest rates would need to stay higher than currently priced” to safeguard financial stability. They also forecast the lira’s annualised depreciation against the dollar to exceed 20 % if policymakers prioritize external-balance stability over inflation reduction.
Potential Risks and Policy Trade-offs
Policymakers face a “delicate balancing act”: a weaker lira could restore price competitiveness but may reignite inflation and undermine the de-dollarisation progress achieved over the past year. The decision will signal whether Turkish authorities align with Goldman Sachs’ view or continue to prioritize inflation control.
Key Data Points
- Lira depreciation YTD 2024: ? 9 % vs. the dollar.
- Forecasted annualised depreciation: > 20 % (mid-range).
- Current-account gap target for 2026: 3.5 % of GDP (~$60 billion).
- Real export growth 2022-2024: flat, with a decline in late 2024.
Verbatim Quotes
- “Given that financial stability depends on maintaining the current level of de-dollarization, a faster exchange rate depreciation means that interest rates need to remain above current market pricing.” — Clemens Grafe, Goldman Sachs economist
- “The lira’s annualized depreciation against the dollar will reach a mid-range level of more than 20 %, even if this means that the pace of inflation decline will slow.” — Basak Edizgil, Goldman Sachs economist
- “The volume of real exports remained largely flat from 2022 through 2024 before falling in the latter half of last year.” — Goldman Sachs report
- “Current-account gap will reach 3.5 % of GDP, approximately $60 billion, by 2026.” — Goldman Sachs report
