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Turkey’s Currency Crisis Stabilizes as Polyester Producer SASA Expands

SASA, a major polyester staple fiber, filament yarn and polymer manufacturer based in Adana, Turkey, is investing $330 million to expand its production capacity.

The investment would lead to an expanded capacity of 367,500 tons per year. SASA said the investment is planned to be commissioned in the fourth quarter of 2023 and its annual contribution to sales volume will be around $550 million.

SASA’s volume rose 32 percent in 2019 to 380,000 tons and increased its sales 27 percent compared to the previous year, reaching 2.76 million Turkish lira (about $250,000)and earning 290 million Turkish lira ($36.5 million). In the first six months of 2020, volume was 277,000 tons, with sales of 344 million Turkish lira ($43 million). SAS projects sales to reach $1.45 billion 2021 and $1.6 billion in 2022.

Turkey has long been a solid supplier of apparel to the United States and Europe, with most of its fabric production used for in-country manufacturing. For the 12 months through January, U.S. apparel imports from Turkey were down 16.79 percent in value to $526.21 million, putting it on par with most other U.S. suppliers during the pandemic-fueled low demand period.

The turn of events for the Turkish currency didn’t bode well for exporters, which could see profits hurt by falling prices if the currency stays weak. On Monday, Turkey’s currency fell 7.5 percent against the dollar, its biggest single-day drop since 2018, following President Recep Tayyip Erdogan’s Friday firing of central bank governor Naci Agbal.

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The turmoil came after Agbal repeatedly raised interest rates in an effort to tame inflation since his appointment in November, the Wall Street Journal (WSJ) reported. Since Agbal was appointed in November, the central bank raised interest rates significantly in an effort to fight inflation. Turkey’s central bank lifted its key rate to 15 percent from 10.25 percent in November, and followed that up with a move to 17 percent in December, according to WSJ.

On Monday, the Turkish lira fell to as low as 8.28 a dollar from 7.22, before regaining some ground to trade at about 7.8 a dollar. On Tuesday, the currency seemed to have stabilized to trade at 7.94 to the dollar. This is above the 6.96 lira to the dollar at its recent low on Feb. 19, and the 6.45 lira to the dollar from a year ago.

Jeffrey Halley, a senior market analyst at currency exchange firm Oanda, told BBC News that Turkish President Erdogan has his own brand of economics–“Erdonomics.”

“The base premise of Erdonomics is that higher interest rates cause higher inflation, a theory that flies in the face of conventional economic theory everywhere,” Halley told the BBC. “Mr. Agbal was widely respected for his attempts to stabilize inflation.”