Turkey

Turkey’s monetary meddling offers scant rewards

15 April 2021

The country’s central bank kept its interest rate at 19%. Having replaced his chief rate-setter in March, President Tayyip Erdogan hasn’t yet got the lower borrowing costs he wants. Rising inflation, a weak currency and the loss of credibility mean policy will need to stay tight.

Turkey’s soft capital controls are transitory fix

29 March 2021

Subtle curbs that make it harder to sell the lira will slow its fall. They won’t be enough if the central bank’s new boss starts cutting rates under political pressure. President Tayyip Erdogan can impose tougher restrictions but will hurt the economy if he is too heavy-handed.

Viewsroom: Turkish trouble and emerging markets

25 March 2021

President Tayyip Erdogan’s abrupt firing of a third central bank governor forced investors to contemplate whether this might precipitate a run on financial assets in other developing markets, including South Africa. Breakingviews columnists discuss the implications.

Turkey’s battered banks face a slow-burn crisis

25 March 2021

A plummeting lira creates the risk of a funding squeeze for Garanti BBVA, Akbank, Isbank and others. But they’ve survived past crises without a bank run. The more likely problem for the sector is mounting bad debt, which will drag down returns and capital for years to come.

South Africa offers Erdogan an inflation lesson

23 March 2021

A steep plunge in the lira, of the sort seen this week after Turkey’s president fired his central bank boss, usually drags down the rand. Not this time. The South African currency’s resilience shows the value of a credible and independent central bank left free to control prices.

Turkey picks worst time to fire central banker

22 March 2021

President Tayyip Erdogan removed hawkish Governor Naci Agbal, replacing him with a professor who says high interest rates cause inflation. A widening current account deficit, depleted forex reserves and inflation at 16% make a currency crisis both more likely and more painful.

Turkey gives investors early Thanksgiving treat

19 November 2020

The new central bank chief hiked a key interest rate to 15% from 10.25%, the biggest tightening in more than two years. He vowed to bear down on inflation and improved transparency by reducing the number of policy rates that matter. It’s a good start at rebuilding market trust.

Turkey’s new economy team will face fresh problems

9 November 2020

President Tayyip Erdogan installed a new central bank boss while his son-in-law quit as finance minister. Credible policymakers are more likely to hike rates. Just as well: without President Donald Trump, Ankara’s foreign policy – and the lira – are more vulnerable to sanctions.

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.