In one of the most remarkable economic trends recently, the dollar has been losing value against the currencies of many developed and emerging economies, including the Turkish lira. The tide of late 2016 seems to have turned. The greenback, which had rallied with Donald Trump’s march to the White House, is on the decline because of Trump again — this time under the impact of his poor performance. The currencies that had previously fallen against the dollar are all recovering now, albeit at different paces. In Turkey, the reversed trend is affecting not only economic balances but the political equilibrium. How long this climate will last is hard to predict, but one thing seems almost certain: Trump’s America will be the most decisive factor in this.
US economic growth is lagging behind Trump’s 3% annual target, barely managing 2.6% in the April-June period after 1.2% in the first quarter. While the 4.3% unemployment rate is fine, the real problem lies in inflation running low, especially in the second quarter. An inflation rate of less than 2% is widely seen as a sign that demand has not strengthened enough and, thus, the 3% growth target remains an uphill task. The fact that the current account/GDP ratio remains at 2.6%, in contrast to an average of about 5% in the 2002-2008 period, is another sign of weak growth. In short, the US economy is struggling to generate the desired increase in consumption and, thus, a stronger growth momentum. The primary reason for the faltering is Trump, whose support has plunged fast since his election in November.
