ISTANBUL, Sept. 15 (Xinhua) -- Euro's continuous depreciation against the dollar has increased the pressure on the Turkish economy, foreshadowing new challenges amid the country's already record-high inflation, a Turkish expert said in a recent interview.
With energy insecurity and surging inflation hanging over Europe, the euro has been in freefall this year. While the dollar, buoyed by the U.S. federal reserve's consecutive interest rate hikes, has been consolidating power.
"Right after the clashes in Ukraine at the end of February, the U.S. federal reserve board met in March and increased the interest rates ever since," said Cenk Akyoldas, a senior trader who serves as a finance coordinator in the Istanbul-based World Trade Business Development Council, a non-governmental organization that identifies and manages trade and investment opportunities both in Türkiye and abroad. "All this brought the parity to where it is now," he added.
Euro was traded at around 1.12 dollars at the start of 2022. As the dollar slowly strengthened, the exchange rate between euro and dollar dropped to 1:1 in July, the first time since 2002. The weakening euro brought a decrease in revenue not only for Europe but also for its trade partners, including Türkiye.
"Rising U.S. dollar is a severe potential problem, especially for developing countries such as ours," said Akyoldas, adding "despite Türkiye's efforts to find alternative export markets for its products, our main export market is Europe."
Türkiye has long been enjoying the strength of the euro against the dollar, with most of its liabilities and imports -- including raw materials, energy, and products -- in dollars while earning almost half of its revenues in euros because of its strong trade and tourism relationship with the European countries. The unique advantage, which compensate Türkiye for its shortcomings in other financial revenues, is now vanishing.
"The exchange rates have to be managed carefully in such situations. For developing countries with negligible profit margins, even the successful sale of a product can potentially mean a loss of revenue if the export currency falls and the imported currency (for raw materials) increases." said Akyoldas.
According to Akyoldas, if the parity issue is not managed with the utmost care, some of Türkiye's recent strategic gains, such the relocation of some manufacturing centers from Europe to Türkiye amid concerns about inflation and potential recession, could be neutralized.
"Turkish Exporters Assembly (TIM) recently stated that since the beginning of the year, Türkiye has already seen a loss of revenue of about 8 billion dollars from the change in the parity alone," Akyoldas said.
"Even with the volume of the exports and production staying the same, there still is a loss of revenue," he said.
Recent data from TIM show that in August alone, parity losses has increased 1.4 billion dollars compared to a total of 21.3 billion U.S. dollars in exports.
Mustafa Gultepe, president of TIM, called for a strategy revision in his monthly address. "This new situation with euro/dollar parity is expected not to change in the short term," said Gultepe. "Thus, we should revise our exports to the European Union."
Türkiye's economy has been facing a tough time amid currency devaluation and high inflation. The yearly increase in the producer prices in Türkiye is now around 140 percent, and the annual consumer inflation is at a 24-year high of more than 80 percent in August. ■