ISTANBUL, July 29 (Xinhua) -- The Turkish currency, the lira, has dropped to a record low against the euro on Wednesday amid worries about the emerging country's weakening foreign currency reserves and growing foreign-denominated debt.
At midday, the Turkish lira traded at 8.2 to the euro and at 6.96 to the U.S. dollar. The euro has gained about 23 percent on the lira year to date, specialists said.
The depreciation of the Turkish national currency comes as Turkish state banks have sold up to 2 billion dollars this week alone to try to prop up the ailing lira, reports said.
The Turkish central bank had managed to hold the lira's rate against the dollar relatively steady at around 6.85 since mid-June after the lira hit a record low of 7.26 to the greenback in early May, denting its reserves seriously especially amid the coronavirus outbreak that caused businesses to close down.
However, analysts have argued that these efforts have largely been insufficient.
"The central bank's recent increasingly draconian attempt to manage the lira is likely to prove futile," the economic research company Capital Economics said in a report, noting Turkey is in need of large external financial help.
"The coronavirus crisis has triggered a slump in exports and the tourism sector has ground to a halt, causing the current account deficit to widen sharply in recent months," the report said, warning further falls may lie in store.
Turkey's economy was only just recovering from a 2018 recession when the COVID-19 pandemic broke out this year, sending a wave of shock through the vulnerable economy. Inflation and unemployment have gone up, causing increasing concern for the health of the economy.
June's inflation in the country of 82 million was reported at 12.6 percent, the highest since August 2019, rising steadily from 8.6 percent last October.
Meanwhile, Turkey's foreign debt stock totalled 431 billion dollars by the end of March, accounting for nearly 57 percent of the country's GDP, according to the Treasury and Finance Ministry.
On Wednesday, Turkey's central bank revised its inflation estimate for 2020 upward to 8.9 percent, from the previous 7.4 percent, Murat Uysal, the central bank's governor, said at a televised news conference in the capital Ankara.
Uysal indicated that the central bank's monetary policy was in line with its inflation forecasts, and inflation is expected to slow to 6.2 percent at the end of 2021.
Enver Erkan, an economist from Istanbul-based Tera Yatirim, an investment consultancy, said uncertainties remain for the Turkish economy.
"The picture is uncertain; within the framework of credit expansion, the depreciation of the lira and the stickiness effect in inflation, we think the risks regarding current (inflation) estimations are also upward," he remarked.
Turkey's economic woes existed before the coronavirus pandemic, but have been made worse as tourism, a vital source of foreign currency, is still struggling after months of closure and a low demand.
Tourism accounts for more than 10 percent of Turkey's economy, brings in dozens of billions of dollars in hard currency and employs millions of people. With a vulnerable economy and dwindling foreign currency reserves, tourism revenues are essential for the nation.
Turkish President Recep Tayyip Erdogan has refused any financial assistance from the International Monetary Fund (IMF) and economy authorities have launched swap agreements with Qatar and China to attract much-needed foreign currency in recent months.
Turkey's economy is expected this year to shrink by five percent for the first time in more than a decade, but is expected to bounce back in 2021, according to the IMF. Enditem