UBS report: Turkish lira to hit 48 against dollar by 2025

Swiss banking giant UBS said it anticipates a continued depreciation of the Turkish Lira, expressing the expectation of a relaxation in monetary policy in the second half of 2024

The focal points of the report include projections on the exchange rate, economic growth, and the potential actions of the Central Bank.

The report also emphasizes that the Central Bank of the Republic of Turkey (CBRT) may initiate some easing in its monetary policy during the latter part of 2024.

In its report, UBS forecasts a significant drop in Turkey's Gross Domestic Product (GDP) growth rate, from an average of 5% in the 2022-23 period to 2.4% in 2024 and further down to 3.2% in 2025. UBS suggests that this contraction could provide an opportunity for a slight correction in macro imbalances, resulting in lower inflation and a reduction in the current account deficit.

UBS predicts a sustained weakening of the Turkish Lira, projecting it to reach 39 against the US dollar by the end of 2024 and 48 by the end of 2025. The report also anticipates a decline in inflation in the latter half of 2024. However, UBS expects inflation to surpass the CBRT's forecast of 36%, reaching 41.4% by the end of 2024. While UBS foresees the CBRT maintaining interest rates at 40% in the first half of 2024, it does not rule out the possibility of another rate hike.

Making a bold prediction, UBS suggests that a sharp drop in inflation from the third quarter of 2024 onward will prompt the CBRT to start easing its monetary policy. The report concludes with UBS forecasting the policy interest rate to fall to 25% by the end of 2024.

UBS's latest report predicts a continued devaluation of the Turkish Lira, forecasting it to reach 39 against the US dollar by the end of 2024, with expectations of economic contraction and the Central Bank contemplating policy easing in the latter part of the year.