I have never had anything to do with fortune-telling, nor with astrologers… Believers believe, and no one can say anything about that.
Besides, this is not an article that aims to tell the dollar’s fortune for 2024. This is an article that aims to remind and reconsider concrete data once again…
Dollar forecasting is the easiest job!
Whether it is rising rapidly or rising very moderately, as it has been in recent months, the exchange rate is the main indicator for the Turkish people about the economic outlook.
If the exchange rate is rising, it means that the economy is doing badly.
When the exchange rate does not increase, the opposite is not considered. Because this time, the expectation is that the exchange rate will suddenly increase rapidly in the future.
Predictions start flying in the air, “It will go here, it will go there”.
In our country, making exchange rate forecasts is the easiest thing to do.
Almost everyone knows the real level of the exchange rate!
I don’t know how they know, but they do! Citizens on the street can make predictions without thinking too long; maybe they have savings in foreign currency, maybe they are speaking from the heart, maybe they see a possible recurrence of the periods of rapid rise in the past, maybe they say “Actually, it should be 40 liras” or “It should be 50 liras” for the dollar rate, which is now close to 30 liras…
However, some people with the word “economist” in front of their names do not and should not have the right to make such random predictions.
In fact, even looking at the extent to which the past predictions of those who make abundant exchange rate forecasts, reveal how wrong they are.
I wonder if some “experts” in exchange rate forecasting, for example, predicted that the dollar, which was below 9 liras in the first nine months of 2021, would double to over 18 liras on December 20, 2021. And when the dollar rose above 18 liras on December 20 and citizens bought foreign currency in droves, was there a forecast that the exchange rate on December 21 would drop to 11-12 liras?
If the exchange rate in Turkey, or more precisely the value of our currency, were based on the requirements of the economy, one could, of course, make predictions about it. However, the main determinant of the exchange rate in our country is not the economy, but politics.
If you lower interest rates at an unexpected time or come up with an unexpected invention such as the foreign currency protected deposits (KKM), no one’s predictions will be accurate, and in fact they are not.
So what might the dollar be in 2024? You may say, “After all these words, you are going to make a prediction”; but as I mentioned in the introduction, this article is a reminder of the already announced forecasts.
In the 2024-2026 medium-term program, the annual average dollar exchange rate for 2023 was estimated at 23.88. We wrote in this column on September 7 that the year-end exchange rate should remain between 29.50-30.00 in order for this forecast in the program announced in early September to hold.
We completed 2023 and the year-end exchange rate was 29.44 and the year average was 23.74. We see that the forecasts in the program have been fully met, even slightly below the forecasts.
The medium-term program shows that the average exchange rate for 2024 is estimated at 36.78. An increase of 55 percent is expected compared to last year’s average of 23.74.
I have written before and I would like to emphasize once again that it is completely wrong to compare the 55 percent increase in the average dollar exchange rate with the year-end CPI increase forecast of 36 percent.
55 percent can only be compared with the annual average price increase forecast, i.e. the deflator. That rate is already 55 percent. Therefore, there is no inconsistency in the exchange rate increase assumption.
“It will be 40 liras by the end of the year”
Wait, wait, let me state once again, this is not my prediction. I am not actually saying 40 liras for the end of the year, the medium-term program indirectly says so.
If we act according to the requirements of the economy in 2024, the dollar exchange rate will increase as much as inflation and will be around 40 liras. When we increase the exchange rate of 29.44 at the end of 2023 by 36 percent, we reach 40 liras.
However, if inflation does not remain at this rate (which is highly unlikely) or if political preferences override economic necessities, as we have seen before, we may see the exchange rate much higher or, with a small probability, lower.