Turkey

Turkey has only one way to avert new crisis

13 August 2020

The lira has fallen by almost a fifth against the dollar this year. The central bank’s reserves are depleted and President Tayyip Erdogan dislikes interest rate rises. Accepting a gradual tightening of monetary policy is his one hope of avoiding a rerun of the 2018 crash.

Turkey’s policy sins will be visited on companies

7 May 2020

The lira fell to a record low against the dollar. The central bank set interest rates too low in the past, then depleted FX reserves to limit the exchange-rate damage. Its war chest is too small to prevent further depreciation. Disaster looms for firms with foreign-currency debt.

Turkish whip-round is sloshing state money about

14 April 2020

Saddled with dwindling FX reserves, high inflation and a budget deficit, Turkey’s President Tayyip Erdogan is asking for aid from individuals and firms to protect society’s most vulnerable from the Covid-19 fallout. But so far the biggest contributors are stretched state banks.

Turkish canal is bad way to fix infrastructure gap

31 March 2020

President Tayyip Erdogan is building a $12 bln waterway in Istanbul. The stated aim of stopping ships from crashing into the Bosphorus fails to make up for the risk of environmental catastrophe. There’s no promise of new revenues either. The only winners will be land speculators.

Turkey’s Erdogan faces new economic policy nemesis

12 March 2020

Former minister Ali Babacan has launched a party. There’s no election until 2023 but a conflict with Russia and market turmoil could derail Ankara’s economic plans. Cogent alternatives to President Tayyip Erdogan’s counterproductive policies will begin to win over voters.

Turkey set for good year before economic reckoning

27 December 2019

More fiscal and central bank stimulus will push growth towards President Tayyip Erdogan’s 5% goal for 2020. Yet inflation will be restrained thanks to lira stability. A credit binge encouraged by Ankara’s policies can last the better part of a year before screeching to a halt.

UniCredit pays up for tricky Turkish escape

2 December 2019

The 28 bln euro Italian bank trimmed its holding in Turkish lender Yapi Kredi. Break fees and a steep discount suggest local partner Koc Group got a good deal. Yet CEO Jean Pierre Mustier frees up capital, and paves the way for a proper exit, if markets and regulators play along.

U.S. hits Turkey where it hurts with bank charges

16 October 2019

The Justice Department accused Halkbank of helping evade sanctions against Iran. A big fine would erode the state-owned lender’s already weak capital position. Ankara can act to contain the damage but a ban on shorting bank shares signals the government sees systemic risk.

Syria assault has cruel economic logic for Turkey

10 October 2019

President Tayyip Erdogan hopes attacking Kurdish militia will enable him to send Syrian refugees home and launch a $27 billion construction drive. A severe humanitarian fallout could lead to tougher U.S. reprisals. But if Turkey can avoid these it would help its battered economy.

Turkey economic plan is hostage to foreign policy

8 October 2019

A 2020 growth goal of 5% is ambitious but not madcap. Subsiding inflation means there’s room to cut interest rates. But if military action in Syria hit markets or trigger U.S. sanctions, policymakers will face a choice of defending the lira or easing policy to help the economy.

Global central bank assault claims Turkish victim

7 July 2019

Desperate to boost growth, President Tayyip Erdogan has fired the country’s central bank chief. He’s the latest casualty of a worldwide attack on independent monetary authorities. The blow to confidence makes any cut in the main rate, held at 24% since September, more damaging.

Turkey elections pave way for bad economic choices

1 April 2019

Setbacks that President Tayyip Erdogan suffered in local elections came after the economy tipped into recession. He will be all the keener on policies that will stimulate activity in the short run. Investors would prefer reforms to boost investment and may take fright again.

Turkey’s attack tactics are worst form of defence

27 March 2019

Ankara is making it harder to bet against the lira, but overnight swap rates of 700 pct also make hedging prohibitive. Probes by the bank watchdog mean a research drought. Investors will dump Turkish assets rather than stay exposed, especially when experts are opting to keep mum.

Turkish bank smoke signal augurs pain ahead

7 December 2018

Akbank, the country’s fifth-largest lender by assets, has launched a rights issue to bolster capital ratios. That’s wise given the economy’s problems. Rising bad debts, higher funding costs and liability mismatches will inflict more financial pain on banks in the coming year.

Saudi oil could help grease Turkish discretion

24 October 2018

Leaked details of a Saudi journalist’s death have dominated Turkish media but President Erdogan hasn’t yet directly implicated the kindgom’s crown prince. Ankara may be hoping to use its leverage to help its economy. The lira has recovered, but cheap oil would still help.

Viewsroom: Saudi fiasco sets Wall Street ablaze

18 October 2018

Bankers and officials have ditched a huge Saudi shindig after Turkey accused the kingdom of killing a prominent journalist – but big deal fees and oil reserves make the kingdom hard to shun. Breakingviews columnists discuss the financial ramifications of the diplomatic crisis.

Wall Street shows Trump the way on Saudi Arabia

15 October 2018

BlackRock’s Larry Fink and Steve Schwarzman of Blackstone have joined other CEOs in skipping Riyadh’s “Davos in the Desert”. Private sector boycotts usually follow state sanctions. The U.S. government’s inaction reflects its reliance on Saudi Arabia, and fear of high oil prices.

“Davos in the Desert 2” faces a sophomore slump

8 October 2018

The possibility that a Saudi journalist was killed in the kingdom’s Istanbul consulate will add to concerns foreigners harbored about attending the crown prince’s second confab in two weeks. Morality aside, the economics of going mostly appeal to bankers – and then just barely.

Turkey’s outbreak of common sense has limits

13 September 2018

The central bank has hiked rates more than markets expected, a welcome sign of independence after attacks by President Erdogan. The move may avoid a currency crisis, but Ankara’s political and economic vulnerabilities endure. And tensions between bank and state may get worse.

Capital retreat turns light on Turkey lookalikes

17 August 2018

Other emerging economies also have lots of foreign currency debt or inadequate FX reserves. Some, such as South Africa and Argentina, are already hurting. Breakingviews ranks the countries that look the most vulnerable as flows to riskier markets go into reverse.