Weak lira fuels Turkish export boom

Having the worst-performing currency among major emerging market economies is not a recommendation for portfolio investors in Turkey, but it is proving a big plus for the country's exporters. The lira has weakened by about 16 percent against the dollar and 19 percent against the euro since the start of this year.
The benefits are starting to show up in trade data: annual export growth climbed to 30 percent in August from 24 percent in July. When the lira hit an all-time low of 1.83 to the dollar a month ago, dragged down by the central bank's low-interest rate strategy, international fund managers voiced alarm.
But neither the government nor the central bank showed serious concern; although the central bank has conducted large auctions of foreign exchange in an apparent effort to slow the lira's decline or prevent a sharp fall beyond 1.80, but it has not tried to reverse the currency's weakness.
Deputy Prime Minister Ali Babacan, who oversees the economy, told people early this month not to complain about the currency losing value, arguing it should be seen positively given economic conditions.
Dursun Oguz Gursoy, a member of the Sectors Council at the Turkish Exporters Assembly, said: "We consider the central bank's measures as very favourable for Turkish exports. I think the 1.7500-1.8000 (per dollar) band allows Turkish exporters to do business."
The benefits of currency weakness could become even more pronounced in coming months, despite a slowing global economy, as most exporters' current contracts were signed before the lira fell to its current levels. Exports have played a major role in the rapid growth of Turkey's economy since Prime Minister Tayyip Erdogan's ruling AK Party came to power in 2002. The value of exports jumped to $114 billion last year from $36 billion in the government's first year.
A wide range of factors, not merely a weak currency, has contributed to Turkey's export boom. Analysts say the country's large domestic market, which is highly competitive, gives local companies the economies of scale and expertise to compete internationally. Greater political stability in the past decade has allowed rapid development of infrastructure.