Perhaps only President Recep Tayyip Erdogan of Turkey would exclaim “I am increasingly against the internet every day” in the middle of a private meeting on press freedom.
That indeed is what the outspoken Turkish leader just did, according to the Committee to Protect Journalists (CPI), which met Erdogan in Ankara this week, together with the International Press Institute (IPI). Read more
Turkey is in an uncomfortable place. Amid a general turn away from emerging markets, fuelled by the rise of the dollar and expectations of US rate rises, the Turkish economy is, if not in investors’ crosshairs, close to the centre of concerns.
The lira is skirting seven month lows, undermined by worries about the country’s fundamentals (notably its high current account deficit), its geopolitical position (bordering Iraq and Syria, not to mention the jihadis of Isis) and more besides.
That makes the difference between what appear to be two schools of thought within the Turkish government particularly important. Read more
Poor forward planning and political manipulation of energy prices look likely to leave Turkey facing gas shortages this winter, even before the prospect of regional gas cuts due to the on-going hostilities in Ukraine.
Turkey last week experienced an unexplained drop in pressure in its western import line, through which it receives 14bn cubic metres (bcm) of gas from Russia, or about 30 per cent of Turkish demand. That sparked fears of further cuts during the peak mid winter demand period should a working ceasefire not be concluded.
But Turkey’s gas woes are not confined to one import line through Ukraine. Read more
One of the biggest questions facing Turkey is not so much who is going to win Sunday’s inaugural presidential election – prime minister Recep Tayyip Erdogan is heavily favoured – but what kind of government the country will have afterwards.
If Erdogan does head to the presidential palace later this month, so vacating the premiership, a new government will have to take office-even though he has made clear his ambition to keep running the country. Read more
Here’s an example of what may pass for high finance Turkish style: talk down an asset and then try and nab it for yourself.
This may not be a path that is permitted for non-governmental actors, but then sometimes it seems that all roads lead back to the country’s government, notably its powerful prime minister Recep Tayyip Erdogan.
Last week, he was quoted as lashing out at an Islamic bank in Turkey named Bank Asya. Read more
Turks are divided over the Prime Minister Recep Tayyip Erdogan, according to a new poll conducted by the US think tank Pew Research Center ahead of the country’s first presidential elections.
The survey, carried out in April and May, found a majority of 51 per cent dissatisfied with the direction of the country with only 44 per cent satisfied and an even split on the question of whether Erdogan’s influence has been good or bad with 48 per cent of Turk’s taking either side. Read more
Investors could be forgiven for being confused by the signals coming out of Turkey’s central bank on Thursday.
Governor Erdem Başçi (pictured) suggested that rate cuts were likely to continue. Speaking at a press conference in Ankara, he said the markets were pricing in a cut in the key policy rate of about 50 basis points and that any further interest rate cuts would be “measured”. Read more
Turkey should adopt a “sufficiently restrictive” monetary policy to dampen inflation and balance growth or remain at the mercy of uncertain capital flows, the Organisation for Economic Co-operation and Development (OECD) recommended in a report on Thursday.
The report tells a familiar story: Turkey’s dramatic growth in the 2000s was mainly driven by domestic demand and has led to a large current account deficit and external debt. This leaves the economy vulnerable to turmoil in global financial markets as was seen in 2013 and earlier this year.
But the tightening is unlikely to come soon. Last month Turkey’s central bank opted to cut rates by 75 basis points to 8.75 despite inflation being almost twice the bank’s 5 per cent target.
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. Read more
Turkey and Azerbaijan have further cemented their close relations with the signing of a $3.29bn credit agreement for the Turkish subsidiary of Azeri state oil company Socar, for the construction of a 10bn tonnes a year oil refinery to be constructed at Aliaga on Turkey’s Aegean coast.
The credit package, formally agreed on Friday, is both the largest single project finance agreement in Turkish history and, at 18 years, the deal with the longest maturity to date. Read more
Central and Eastern European local currency bonds lifted following a widely-anticipated move by the European Central Bank to cut key interest rates in a bid to anchor the eurozone’s tentative economic recovery.
The confirmation of cheaper money across the continent sent investors searching for riskier assets, further pushing down yields on Turkish, Hungarian and Polish bonds which have rallied over the last month. Read more
Not everything in life is always completely and irredeemably bad, even if you happen to be running an emerging economy. In the case of currency devaluations handed to the big emerging markets over the past year, however, the silver lining has not made up for the cloud.
It was a year ago this week that the “taper tantrum” shook emerging markets, after comments from then Fed chairman Ben Bernanke raised fears of the US central bank tightening monetary policy. Exchange rates dropped sharply in the fragile fraternity of emerging markets with flexible currencies – Brazil, India, Indonesia, South Africa and Turkey. However, bad though the turbulence was – and the panic returned for a short while earlier this year – the currency movements should at least have had the benefit of handing those economies’ exports a competitive advantage through a lower exchange rate.
Hopes for an early release of disputed oil pumped from Kurdistan – but held in Turkey – are rising, a person familiar with the issue said. A resolution to a political impasse between the semi-autonomous Kurdistan region and Iraq could free up for sale millions of barrels of oil that have been stockpiled on the Eastern Mediterranean coast since the end of last year.
Oil has been flowing from Kurdistan – sometimes described as ‘the last great oil frontier’ with a potential 50bn barrels in reserves – through a newly-constructed pipeline to the Turkish export terminal of Ceyhan for more than five months. Read more
By Anthony Skinner of Maplecroft
Even before the disaster of Tuesday’s explosion at a mine in western Turkey, questions were being raised about the future of prime minister Recep Tayyip Erdogan. It is yet another example of the volatility that seems to be perpetual in the country.
In recent months, the lira has gone from being one of the worst performing currencies in the world to one of the best. Many investors were reassured by the victory at March’s municipal elections of Erdogan’s centre-right Justice and Development Party (AKP), in the midst of a battle for influence and power with the moderate Islamist Gulen movement. Read more
Turkey has a penchant for plastic. Over the past decade, consumers have gorged themselves on credit cards marketed aggressively by banks. The country now has more than 57m credit cards, up from fewer than 16m in 2002, in a population of 76m people. That expansion helped push the ratio of household debt to disposable income from 4.3 per cent in 2002 to 55 per cent by the end of last year.
Such indebtedness is causing misery: more than 1m people were unable to pay off personal loans or credit cards last year, nearly half as many again as in 2012. Read more
By David O’Byrne of bne in Istanbul
Turkish football is no stranger to empty stadia, with the football authorities regularly ordering matches to be played behind closed doors as punishment for the misbehaviour of fans and players alike. But the April 20 derby match between fierce Istanbul rivals Fenerbahce and Besiktas was different. Read more
Turkish banks are likely to suffer over the next few years as the combination of an economic slowdown and higher interest rates will force more borrowers to the wall. That’s the conclusion of two reports issued this week by rating agencies Moody’s and Standard and Poor’s.
Moody’s reckons it’s the banks who’ve lent to small and medium businesses who are the most exposed, while S&P sees consumer debt as the problem. Read more
Food and beverage vendors and technology firms are most vulnerable among those Turkish companies with hard currency debts to the lira’s sharp depreciation, according to a survey of 10 corporations by Fitch, the credit rating agency.
Assuming a 30 per cent depreciation in the lira against a basket of currencies since the end of 2012, Fitch examines which companies have the highest proportion of their earnings in lira versus debts in hard currency – a transgression known as “original sin”.
Turkish corporates have come late to the eurobond market, with $4.1bn in foreign currency bonds outstanding last September, up from just $400m at the end of 2012, according to the Bank for International Settlements.
Should investors be worried? After all, the surge in issuance has come during a period of turmoil for the lira and other EM currencies, and issuers risk being found guilty of original sin. Read more
Turkey’s banks are having a bad time. The sector’s 16-bank MSCI index fell by as much as 15 per cent during the past month, hitting a price-to-book ratio of less than 1 for the first time in five years.
Perhaps that isn’t surprising given that higher interest rates, slower growth and a cheaper lira are likely to persist, while credit expansion won’t sustain its rapid pace of the past decade. In 2013 alone the volume of loans rose by just shy of 30 per cent and the ratio of banks’ loans to deposits currently stands at 107.7 per cent, after breaching the 100 per cent level in 2013 for the first time in at least a decade.
So, how well prepared is the financial system for the end of a world of easy money and abundant capital inflows?