What is going on with Turkey’s central bank? Why, more specifically, has it just cut its benchmark interest rate by 75 basis points to 8.75 per cent when the latest figures showed inflation just shy of 10 per cent? And why did it do that in the wake of a previous 50 basis point cut in May?
According to the bank’s version of events, inflation is no longer so much of a concern, because of Turkey’s mixture of increased exports, slower domestic demand and a stabilised currency. Continue reading »
The Turkish lira hit the latest in a series of all-time lows against the dollar on Monday when it fell to TL2.2502, on a day when the country’s new economy minister said a further slide would not be a problem and called on the central bank not to increase interest rates.
An interest rate rise might in normal circumstances be expected at the bank’s monetary policy committee meeting on Tuesday.
But this is Turkey. Continue reading »
The FT today publishes a special report, Investing in Turkey, on the challenges facing the country’s government and private sector as it struggles to gain competitiveness and deal with one of the most daunting current account deficits in the developing world. At 13.00 GMT, Daniel Dombey, Turkey correspondent, and freelance writer Andrew Finkel will host a live discussion on Twitter on the country’s economic and political future. Here, Dombey outlines the difficulties Turkey faces in delivering the investment needed for growth. Continue reading »
Has there just been a landmark change in how Turkey runs its economy? It depends on how much importance one gives to what the country’s central bank says rather than what it does. It also depends on how much of a free hand it has.
There’s clearly been a noteworthy shift – the bank, widely known for its unorthodox stance (read: its reluctance to raise interest rates) tightened policy this week in a way that had some analysts clamouring that the days of unorthodoxy were over. Continue reading »
Credit card debt is the latest frontline in Turkey’s bid to make its economy less vulnerable. For several years, the country’s technocrats have fretted about rates of loan growth running at an average of about 30 per cent a year.
So the country’s banking watchdog took a dramatic step last week to get the phenomenon under control, with new rules limiting credit card borrowing limits. Continue reading »
Too much public spending, excessive reliance on domestic demand and loose monetary policy – the International Monetary Fund has made clear its concerns about Turkey in some of its harshest criticism of the country in recent years. Continue reading »
Turkish exports are looking up, according to the latest data. That’s heartening news for a country that has boomed in recent years on the back of domestic consumption but which might not be able to do so in the near future. But some disconcerting subtrends lurk underneath the good overall figures, notably a striking slump in sales to the Middle East. Continue reading »
Call it the $164.5bn question. Turkey’s financing issues have sparked off concerns of late, as the extent of the economy’s dependence on continued ultra-loose US monetary policy appears to become ever clearer.
One well-known issue is the country’s current account deficit, which is still hefty despite lower growth than in recent years and which is overwhelmingly financed by relatively fickle portfolio flows. Another is a jawdropping number – the $164.5bn of foreign currency denominated debt coming due in the next 12 months. Continue reading »
Let bygones be bygones
So, how are the seemingly vexed relations between Turkey’s government and the country’s biggest company, Koc Holding? Not as bad as all that, according to Mustafa Koc, the man who heads the family-controlled conglomerate.
Really? Continue reading »
This week, Turkey reported better than expected growth figures. But Thursday, it came out with worse than expected current account figures – a $5.8bn deficit for July, compared with an expected $5.5bn or so.
So the phenomenon widely seen as the Turkish economy’s biggest Achilles heel – the deficit that makes the country deeply reliant on foreign funds – is still stubbornly large. This at a time when foreign resources are expected to be in much less bountiful supply, due, among other factors, to the prospect of US Federal Reserve tapering its monthly bond buying programme. Continue reading »
In these days of increased scrutiny of emerging markets, it is always important to keep a close eye on the most telling numbers about an individual economy.
One such figure came this week, when Turkey reported a higher than expected rate of growth for the second quarter – 4.4 per cent, compared with expectations of 3.5 per cent or so. There were other stories tucked away in the data – notably the importance of household consumption, state spending and inventory building in boosting demand, even as private sector investment declined. But overall the news was certainly a fillip to the government in a difficult economic environment. Continue reading »
It may or may not be a coincidence that the Turkish lira touched a record low a day after the central bank decided that defending the currency was less important that keeping interest rates in check.
But what is more important is the thinking behind Ankara’s new approach – whether it is prompted by technocratic considerations or the result of political constraints – and whether it is likely to prevail. Continue reading »
It looks like a case of whiplash Thursday for Turkey.
Ankara is looking to stave off a decline in the lira and avoid a rise in interest rates – and all that entails for growth prospects and the prime minister’s denunciations of a shadowy interest rate lobby. Developments this week have made things even harder. Continue reading »
Does it matter that Recep Tayyip Erdogan has just named as his chief adviser a former journalist who alleges that foreign powers have tried to kill the Turkish prime minister by telekinesis?
Here are some reasons why Tuesday’s appointment of Yigit Bulut, a Sorbonne graduate who has also alleged that Lufthansa is plotting against Turkey (pictured), may be of relevance. Continue reading »