Cost of food in Turkey increased 70.33 % in March

[Anthea]

Turkey to banish 10 Western ambassadors

Kavala has been in prison since late 2017
He denies charges of role in failed coup and mass protests
Rights groups say case emblematic of crackdown in Turkey

ISTANBUL, Oct 23 (Reuters) - Turkish President Tayyip Erdogan said on Saturday he had ordered the foreign ministry to declare 10 ambassadors from Western countries 'persona non grata' for calling for the release of philanthropist Osman Kavala.

Kavala has been in prison for four years, charged with financing nationwide protests in 2013 and with involvement in a failed coup in 2016. He denies the charges.

In a joint statement on Oct. 18, the ambassadors of Canada, Denmark, France, Germany, the Netherlands, Norway, Sweden, Finland, New Zealand and the United States called for a just and speedy resolution to Kavala's case, and for his "urgent release". They were summoned by the foreign ministry, which called the statement irresponsible.

"I gave the necessary order to our foreign minister and said what must be done: These 10 ambassadors must be declared persona non grata at once. You will sort it out immediately," Erdogan said in a speech in the city of Eskisehir in northwest Turkey.

"They will know and understand Turkey. The day they do not know and understand Turkey, they will leave," he said to cheers from the crowd.

The U.S., German and French embassies and the White House and U.S. State Department did not immediately respond to requests for comment.

Kavala was acquitted last year of charges related to the 2013 protests, but the ruling was overturned this year and combined with charges in another case related to the coup attempt. read more

Rights groups say his case is emblematic of a crackdown on dissent under Erdogan.

Kavala said on Friday that it would be "meaningless" for him to attend his trial as a fair hearing was impossible given recent comments by Erdogan.

Erdogan was cited on Thursday as saying the ambassadors in question would not release "bandits, murderers and terrorists" in their own countries.

"Since there is no possibility of a fair trial under these circumstances, I believe participating in hearings and delivering my defence will be meaningless from now on," Kavala said in a written statement.

The European Court of Human Rights called for Kavala's immediate release in late 2019, saying there was no reasonable suspicion that he had committed an offence, and finding that his detention had been intended to silence him. read more

It issued a similar ruling this year in the case of Selahattin Demirtas, former head of the pro-Kurdish Peoples' Democratic Party (HDP), who has been held in jail for nearly five years.

The Council of Europe, which oversees the implementation of ECHR decisions, has said it will begin infringement proceedings against Turkey if Kavala is not released.

The next hearing in the case against Kavala and others is due on Nov. 26.

https://www.reuters.com/world/middle-ea ... 021-10-23/

[Anthea]

Turkish lira hits record low

The Turkish lira weakened 1.6% to a record low against the dollar in early Asian trade after President Tayyip Erdogan said he had ordered the expulsion of the ambassadors of the United States and nine other Western countries

The currency had already hit record lows last week after the Turkish central bank (CBRT) cut its policy rate by 200 basis points, despite rising inflation, in a shock move derided as reckless by economists and opposition lawmakers

The lira hit an all-time low of 9.75 by 1840 GMT on Sunday, weakening from Friday's close of 9.5950. Two bankers attributed the early weakness to Erdogan's comments on Saturday. It has fallen nearly 24% so far this year.

"I worry ... for Turkish financial markets on Monday. The lira will inevitably come under extreme selling pressure," said veteran emerging market watcher Tim Ash at BlueBay.

"And we all know that (Central Bank Governor Sahap) Kavcioglu has no mandate to hike rates, so the only defence will be spending foreign exchange reserves the CBRT does not have."

Erdogan said on Saturday he had told his foreign ministry to expel the envoys for demanding the release of businessman and philanthropist Osman Kavala, who has been held in prison for four years without being convicted.

By Sunday evening, there was no sign that the foreign ministry had yet carried out the president's instruction, which would open the deepest rift with the West in Erdogan's 19 years in power.

Erdogan's political opponents said his call to expel the ambassadors was an attempt to distract attention from Turkey's economic difficulties, while diplomats hoped the expulsions might yet be averted.

Turkey's state banks were expected to cut borrowing costs on loans by around 200 basis points on Monday, according to three people with knowledge of the plan, following last week's central bank rate cut.

https://www.reuters.com/world/middle-ea ... 021-10-24/

[Anthea]

Turkey's banks likely to slash rates on Monday

ISTANBUL, Oct 24 (Reuters) - Turkey's state banks are expected to cut borrowing costs on loans by around 200 basis points on Monday, according to three people with knowledge of the plan, following last week's unexpectedly hefty rate cut by the central bank

The three big public lenders Ziraat Bank, Halkbank (HALKB.IS) and Vakif Bank (VAKBN.IS) are expected to lower rates on corporate, individual, mortgage and other loans, the three banking sources told Reuters, speaking under condition of anonymity because they were not authorised to discuss it.

One lender sent an email to some staff on Friday, viewed by Reuters, notifying them of the plan to cut costs by some 200 basis points. Another senior banking source said state banks will on Monday reduce rates "significantly in order to match" the central bank's 200-basis point cut in its repo rate.

Cemil Ertem, a chief adviser to the Turkish presidency and a Vakif Bank board member, said on Twitter that state banks had cut loan rates down to the central bank's policy rate.

Ziraat Bank had no immediate comment. Halkbank declined to comment and a Vakif Bank spokesperson did not immediately respond to a request for comment on details of the plan.

Policy easing by a central bank typically triggers lower rates for borrowers, stimulating economic activity. But the size of last week's rate cut to 16% shocked markets and was twice as sharp as the most dovish estimate in a Reuters poll.

It sent the lira to a record low against the dollar and boosted benchmark yields, including a jump in Turkey's 10-year government bond to 20.53%.

INFLATION RISK

While the big state banks are expected to follow the central bank, the market reaction last week suggests that extending cheaper loans will be costly for them. And though a sharp drop in rates could help some businesses and consumers, many analysts say it also risks exacerbating rising inflation and lira depreciation which could soon force the central bank to reverse course and hike again.

The government's Turkey Wealth Fund did not immediately comment on banks cutting borrowing costs. It fully owns Ziraat Bank, 75% of Halkbank and 36% of Vakif Bank, public data show.

The central bank declined to comment on the state bank plan or on any possible fallout.

Many analysts say the central bank's credibility is tarnished by Turkish President Tayyip Erdogan's publicly stated calls for lower rates in order to boost credit and exports, despite inflation running near 20% last month.

Governor Sahap Kavcioglu has said publicly that Turkey's central bank sets policy independently. Last week the bank said it cut rates in part because inflation pressure is temporary.

A self-described enemy of interest rates, Erdogan has replaced much of the central bank's top leadership this year. Turkey is now virtually alone in cutting rates while other central banks around the world are hiking to head off rising global price pressures.

'RISK PERCEPTIONS'

State banks aggressively expanded credit last year to ease pandemic fallout.

But some private lenders say they are hesitant given the risks of stoking an economy expected to grow at nearly 10% this year, and possible defaults on companies' foreign currency debt.

The chief executive of lender Isbank (ISCTR.IS), Hakan Aran, said in a televised interview on Sept. 29 that credit costs will not fall unless inflation is brought down first.

"If state-run banks slash rates and turn on the consumer-lending spigot ... the additional liras flooding the system will only drive more dollarisation - exacerbating financial and economic pressures," said Emre Peker, a London-based director at Eurasia Group.

In its policy statement on Thursday, the central bank cited business's difficulty in getting commercial loans due to tight monetary policy.

Central bank data shows that average rates on these loans has held near 20% this year, though one of the sources said it was between 17.5% and 18% at state banks. These rates are among those that banks are expected to cut on Monday, according to the three sources.

Thursday's rate cut was the second by the central bank in two months, following a 100-basis-point cut in September. Policy easing has sent the lira tumbling 13% against the dollar since the beginning of September, to hit an all-time low of 9.75 in early trade on Monday, pushing inflation higher via imports.

Erich Arispe, Fitch Ratings senior director who covers Turkey, told Reuters on Friday that the jump in market yields after Thursday's rate cut shows that "risk perceptions play a role in financing conditions" for Turkey.

https://www.reuters.com/world/middle-ea ... 021-10-24/

[Anthea]

Turkey to expel Syrians for eating bananas

Turkey on Thursday announced the arrest and planned expulsion of seven Syrian migrants over social media posts showing them eating bananas

The state migration service said the posts were "provocative" because they allegedly made fun of the economic hardships being experienced by many Turks.

The service said the seven have been arrested and will be deported back to Syria.

The incident highlights rising anti-migrant sentiment in Turkey during a new wave of economic turbulence that has seen inflation spike and the value of the lira drop.

President Recep Tayyip Erdogan says Turkey is now home to five million refugees and migrants -- most of them from war-torn Syria.

The scandal over the bananas started when a video went viral earlier this week showing a man in Istanbul shouting at a young Syrian woman and accusing migrants of "having have an easier life than us".

"I can't eat bananas and you buy them by the kilogramme on the market," the man says as an angry crowd gathers around the woman.

Some Syrians in Turkey responded by launching a protest movement against discrimination in which they posted videos showing them eating bananas.

The altercation occurred two months after a mob of men attacked the shops of Syrian migrants in the capital Ankara.

That violence was sparked by a street fight in which a Syrian migrant allegedly stabbed a Turkish man to death.

https://www.rudaw.net/english/middleeas ... y/28102021

[Anthea]

Turkish lira plunges

The Turkish lira on Thursday hit fresh lows after the central bank fired the latest salvo in President Recep Tayyip Erdogan's "economic war of independence" by cutting interest rates for the fourth successive month

The reduction of the main rate to 14 from 15 percent comes in the face of an annual inflation rate that has surged past 20 percent and is expected to climb even higher over the next few weeks.

The lira was trading down more than five percent after the announcement.

"The accompanying statement suggests that the easing cycle will be on pause early next year but, even so, the lira will remain under pressure and capital controls are likely," the Capital Economics consultancy said in a research note.

The lira has shed more than half its value since January -- and nearly 40 percent since the start of November -- as policymakers bow to Erdogan's wishes to bring down borrowing costs despite soaring inflation.

This unorthodox approach has wiped out the value of people's saving and thrown swaths of Turkish society below the official poverty line.

1 dollar = 3 liras in 2016
1 dollar = 7.43 liras on January 1
1 dollar = 15.60 liras on Thursday

Erdogan has called for "patience" and argued that his approach will ultimately make Turkey less dependent on outside factors such as the scale of foreign investment and the price of imported commodities.

He has also promised to raise the net minimum wage by 50 percent starting next year. It will stand at 4,250 liras -- now worth around $275 (240 euros).

"We are determined to end (price fluctuations) as soon as possible," he said in a televised address.

- Possible pause? -

Analysts and diplomats believe Erdogan unleashed his pro-growth policy in a bid to revive sagging approval numbers ahead of a general election due within the next 18 months.

The veteran Turkish leader is trying to fight spiralling inflation by bringing down borrowing costs -- the exact opposite of what countries usually do in similar situations.

Central banks around the world are currently raising rates or winding down their cheap money policies to combat consumer price jumps caused by factors related to the coronavirus pandemic.

The Turkish central bank pledged to reassess "all aspects of the policy framework" over the first three month of 2022.

But analysts were uncertain what this review would entail.

"I think the central bank should explain this," JPMorgan Chase's chief Turkey economist Yarkin Cebeci told BloombergHT television.

"I really don't know if they will develop a new policy or try a new experiment."

- 'Unchained' -

Erdogan has cited China as an example as he pushes for economic growth at all costs.

China brought down the value of its currency to help exports and achieve spectacular rates of economic expansion over much of the past two decades.

This created a new middle class that helped China achieve more sustainable consumer-driven growth.

Turkey's economy also expanded at an annual rate of 7.4 percent between July and September.

But most analysts believe Erdogan's attempts to boost jobs and propel economic expansion through cheap exports are likely to end in social turmoil.

Official data show the price of staples such as pasta and potatoes rising by roughly 50 percent from November 2020.

One senior Western official said Erdogan feels "unchained" after stacking the central bank with allies and ousting ministers who refused to subscribe to his unconventional views.

"There is nobody around him anymore who can rein in this fundamental belief of his, whether it stems from his Islamic principles, or shopkeeper mentality, or combination of the two -- he genuinely thinks this is going to work," the Western official said.

https://www.rudaw.net/english/middleeas ... y/17122021

[Anthea]

Erdogan props up currency

ANKARA, Dec 20 (Reuters) - Turkey's lira ended the session up over 20% on Monday after President Tayyip Erdogan introduced a series of steps that he said will ease the burden of the weakened currency on Turks, while vowing to press on with a low-rates policy that led to the lira's slide in the first place

The lira , which was down more than 10% at 18.4 to the dollar earlier, strengthened sharply and ended up 25% on the day at 13.15 in reaction to Erdogan's announcement, in its largest daily trading range on record. It remains down 45% so far this year.

Around $1 billion was sold in markets after Erdogan unveiled the measures, the head of the Turkish Banks Association said.

"I imagine the market was very short the lira and the measures announced by Erdogan to protect domestic investors' savings from lira fluctuations provided some impetus to cover those shorts," said Shaun Osborne, chief FX strategist at Scotiabank in Toronto.

Speaking after a Cabinet meeting, Erdogan said the measures would ensure citizens would not have to convert their lira into foreign currency over the lira crash, including a deposit guarantee promise.

"We are presenting a new financial alternative to citizens who want to alleviate their concerns stemming from the rise in exchange rates when they evaluate their savings," Erdogan said.

"With the interest rate cuts, we will all see how inflation will start falling within months," he said. "This country will no longer be a heaven for those adding to their money with high interest rates, it will not be an import haven."

He also called on "everyone with money, access to finance" to contribute to investments and pledged steps to aid exporters and pensioners.

"Today's move is solely based on the Turkish government's announcement that it would protect against fluctuations in the currency," said John Doyle, vice president of dealing and trading at FX payments firm Tempus Inc.

"The most important piece is that the government says that it will make up for losses in lira deposits if the lira declines exceed interest rates promised by banks. The government did not say how exactly they would execute this plan," Doyle said.

"I think that if you continue to see rate cuts (...) you should continue to expect ample volatility going forward and that many investors will still target fresh record lows despite this historic reversal that we’ve seen," said Edward Moya, senior market analyst for the Americas at Oanda in New York.

Economists have called Erdogan's low-rates model reckless and said inflation would soar to beyond 30% next year.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said the current economic outlook was like "a truck with no brakes," adding Erdogan's newly announced measures diverged significantly from the usual market practices.

"Turkey is going into a complicated process, they are no longer playing the game by the rules," Ozkardeskaya said.

Turkey’s five-year credit default swaps, the cost to insure against a sovereign default, jumped 39 basis points from Friday’s close to 622 bps according to IHS Markit.

ISLAMIC USURY

"We're lowering interest rates. Don't expect anything else from me. As a Muslim, whatever (Islamic teaching) requires I will continue to do that," he said, referring to Islamic finance in which high interest, or usury, is typically avoided.

Despite widespread criticism and the rapid fallout for the economy - including Turks' fast-eroding incomes and savings - Erdogan has forged ahead with his economic program which prioritizes exports and lending.

Under pressure from the president, the central bank cut rates again last week by 100 basis points, sending real rates deeper into negative territory, a red flag for investors and savers. read more

Inflation jumped to 21% last month and is expected to pass 30% next year.

Even after today's sharp gains, the lira has lost about half its value to the dollar this year and is by far the worst performer among emerging market economies, due largely to damaged monetary credibility, analysts say.

In an attempt to slow the selling and address what it called "unhealthy" prices, the central bank has intervened five times this month, though there was no official indication of intervention on Monday. Bankers' calculations show it has sold more than $6 billion from its already-depleted foreign reserves.

"If anything, (Erdogan's announced) measures will bring an end to the uninterrupted breaks through record-lows, but in order for the lira to trade at levels seen last year, more action is needed from the central bank," said Ima Sammani, FX Market Analyst at Monex Europe.


https://www.reuters.com/markets/currenc ... 021-12-20/
Our Standards: The Thomson Reuters Trust Principles.

[Anthea]

Turkish cenbank's net FX reserves

plunge to lowest since 2002

ISTANBUL, Dec 30 (Reuters) - The Turkish central bank's net international reserves plunged to their lowest level since 2002 at $8.63 billion on December 24, from $12.16 billion a week earlier, according to data on Thursday that reflected recent market interventions

The exchange rate used by Reuters on Thursday was 11.4508.

The central bank has announced five direct market interventions this month to stem a currency crash, which bankers say totaled between $6-$10 billion. There were no intervention notices since Dec. 17, though bankers have said the drop-off in reserves point to more state support for the lira.

The latest draw-down puts net holdings below levels reached in April when they dipped below $10 billion.

They then rose through most of the year before coming under pressure again after the bank's December interventions meant to address "unhealthy" prices after a weeks-long lira crash.

In 2019-2020, the net reserves plunged as the central bank sold off $128 billion via state banks to stabilize the lira, which has still steadily depreciated. Such sales emerged as a focus of what the political opposition calls government mismanagement, and some analysts say they have begun again this month though the government denies this.

In 2019-2020, the central bank used swaps with local banks to backstop the FX interventions, an unorthodox policy that spooked foreign investors and local savers.

Data showed the bank's outstanding swap transactions stood at $49.770 billion as of Wednesday. The reserves are in negative territory once the swaps are deducted.

Note: The figures are released every week on the central bank balance sheet as per a letter of intent with the International Monetary Fund dated 18 January 2002. The figures are released in Turkish liras and are converted by Reuters to U.S. dollars using the central bank's official exchange rate from the previous work day.

https://www.reuters.com/world/middle-ea ... 021-12-30/

[Anthea]

Electricity and Gas Prices go up

Turkey added to inflation pressure on Saturday by raising household electricity and natural gas tariffs substantially, citing the surge in global energy prices

The cost of electricity will soar as much as 130% for some households, the Haberturk newspaper estimated, as the country switches to a graduated tariff system.

The moves could further drive Turkish inflation, which is expected to accelerate to 27.4% in December, according to the median estimate in a Bloomberg survey. The country’s statistics institute will announce the actual figure on Monday.

Under the new electricity charges, households will pay 1.37 liras ($0.09) per kilowatt-hour for as much as 150 kilowatt-hours per month, and 2.06 liras above that limit, the nation’s energy markets regulator said in a statement late Friday.

Botas, Turkey’s state gas company, separately raised natural gas prices by 25% for households, 15% for power plants and 50% for factories from Jan. 1, according to a statement on its website late Friday

The weakening lira has contributed to spiraling inflation. Annual retail prices in Turkey’s business capital, Istanbul, rose more than 34% in December compared with 24% in November, according to data published by the city’s chamber of commerce on Saturday.

Istanbul retail prices climbed 9.65% in December from 4.71% the previous month as the cost of housing appliances and food soared.

https://www.bloomberg.com/news/articles ... n-new-year

[Anthea]

Turkey's fight for economic independence

ANKARA - Turkey's consumer prices have soared by the highest rate since 2002, further undermining President Recep Tayyip Erdogan's unorthodox battle for his developing country's economic independence

Analysts attribute the jump of the official reading to 36.1 percent last month to the surging cost of imports, which range from energy to many of the raw materials Turkey's manufacturers turn into exports.

Those costs jumped because of a historic collapse of the lira, which last year lost 44 percent of its value against the dollar.

But ultimately, analysts blame both inflation and the lira crisis on Erdogan's fervent belief that high interest rates cause inflation.

Conventional theory says the opposite is true because higher interest rates slow economic activity by making borrowing more expensive and providing incentives for people to keep their money in the bank.

Here is a summary of Turkey's economic conundrum.

- How did the problems start? -

Calling high interest rates "the mother and father of all evil", Erdogan orchestrated a series of rate cuts starting in September that further undermined economists' trust in the central bank's independence.

Erdogan, who has sacked three central bank governors since July 2019, has refused to accept any responsibility for the lira's collapse or subsequent jump in prices.

"I reject policies that will condemn our people to unemployment, hunger and poverty," he said last year, calling on his supporters to be patient.

The Turkish currency weakened on Monday, trading at 13.4 lira to the dollar, after the inflation data was published.

It fell as low as 18.4 to the dollar at the height of the crisis last month, after starting the year around the 7.4 mark.

- How bad is the crisis? -

Turkey's official inflation target is five percent, but it has remained in the double digits for the past two years.

The monthly inflation reading has turned into a contested political issue, with opposition leaders claiming the government is underreporting the actual price jumps, a charge it denies.

Independent economic institutes such as the Inflation Research Group (ENAG) calculated last month's annual inflation rate at 82.8 percent.

"Even in the figures they make up, domestic producer inflation is nearly 80 percent," main opposition party leader Kemal Kilicdaroglu tweeted on Monday.

The opposition is demanding snap elections to address the crisis, but Erdogan insists they will go ahead as planned in June 2023.

The cost of living is expected to rise further, especially after hikes in the price of consumers' electricity and gas bills of around 50 and 25 percent respectively.

- What does Erdogan expect? -

The president is prioritising growth, with the economy expected to expand by nine percent in 2021 and 3.5 percent in 2022.

During another currency crisis in 2018, the central bank aggressively hiked the main interest rate, but the likelihood of a repeat under a more determined Erdogan is low.

Erdogan has previously cited Islamic rules against usury to justify not increasing rates, suggesting those who try to preserve their savings by converting them into foreign currency and gold were traitors.

Some experts believe Erdogan may be trying to make Turkey more attractive as a hub for cheap production, with local wages worth less in dollar terms.

During a televised speech in Istanbul, Erdogan on Monday hailed a 32.9 percent year-on-year increase in exports to $225.3 billion in 2021.

- How has Erdogan responded? -

Aware of the importance given to the lira's value against the dollar and euro by consumers and businesses, Erdogan last month unveiled a new policy to defend local currency holdings against fluctuations in the exchange rate.

While the lira has since rallied, experts question whether it is sustainable and will be enough to avoid further currency weakness.

Turkey's net foreign currency reserves fell to $8.6 billion last week -- from $21.2 billion two weeks earlier -- further supporting opposition claims that the government was running out of money while indirectly trying to support the exchange rate.

The government has only reported limited currency interventions.

Erdogan has also raised the monthly minimum wage to 4,253.40 liras (about $315), which is still lower in dollar terms than what the minimum wage was worth in January 2021.

https://www.rudaw.net/english/middleeas ... y/03012022

[Anthea]

Economic Collapse

The New York Times reported that Turkey is experiencing a currency crisis, the second in less than two years, and it threatens an economic collapse in the country amid the repercussions of Coronavirus

Economists expect a sharp decline in economic indicators in Turkey, accompanied by an increase in the prices of imported goods such as medicines and fuel.

International investors are concerned about the financial maneuvering and the cheap credit flow that President Recep Tayyip Erdogan used to support the lira and fuel economic growth, according to the newspaper.

Turkey's economic fate has geopolitical implications. In recent times, the Turkish armed forces have acted aggressively in the Mediterranean towards France and Greece, which are NATO allies.

Analysts view the confrontations as to stir up nationalist sentiment and distract Turks from their money problems, especially after His hold on power was shaken last year after his party lost control of the municipal government in Istanbul.

The sharp decline in the value of the lira, which lost 70 percent of its value this August, has already led to a rise in the prices of food and other essentials and to the discontent of citizens.

“Everything is unbelievably expensive,” said Derya, a 41-year-old math teacher ( a government employee who preferred to be anonymous), was quoted by the New York Times as saying.

Derya revealed that She said she was mixing more onions into her meatballs to make them go further. Because of the lira's decline, she said while shopping at an Istanbul market, "We have gotten poorer" due to the drop in the lira.

During the period between 2000 and 2013, average per capita income in Turkey more than tripled, poverty fell by half and Turkey entered the ranks of middle-income countries.

But economic output per person has slipped back to 2010 levels, according to World Bank data, which was reflected in the value of the currency and then the per capita purchasing power.

The Turkish government is now pressing banks to lend more, helping to prop up consumer spending but this also feeding inflation, according to specialists.

The annual inflation rate is about 12 percent, and the declining buying power of the lira is one reason it has been losing value against other currencies.

In addition, many foreign investors have lost confidence in Turkey during the recent crisis, particularly in 2018, which means that there is little demand for lira assets.

Economists say the central bank has begun borrowing dollars deposited in Turkish banks by companies and residents, a strategy that will likely end badly.

https://www.shafaq.com/en/World/NY-time ... ncy-Crisis

[Anthea]

Turkish lira up slightly

Turkey's lira gained in early trade on Monday, reversing some of last week's losses as government efforts to combat surging inflation were put to the test in the wake of a currency crisis brought on by its unorthodox rate cuts

The lira , firmed as far as 13.72 against the dollar and was 0.7% stronger at 13.83 at 0820 GMT, after having weakened 5.3% in the first week of the year.

The currency slumped 44% in 2021, suffering its worst year since President Tayyip Erdogan's AK Party came to power in 2002. The economy's woes were compounded by a leap in annual inflation to 36.1% in December. read more

Finance Minister Nureddin Nebati said last week the government would prioritise the fight against inflation but would follow its own course in doing so, having abandoned "orthodox policies". read more

The government introduced a lira deposit-protection scheme last month to encourage savers to convert forex deposits and support the lira after it hit a record low of 18.4.

But analysts remained sceptical that Ankara's policies would succeed given that its unorthodox interest rate cuts and political pressure on the central bank remain the core problems.

"The problem is the inconsistency of monetary policy and lack of independence of the central bank," Commerzbank said in a note, describing the FX-insured deposits as ill-conceived and doing little to stem the lira crisis.

"With the real interest rate now at -20%, the sorry state of affairs is likely to repeat soon again."

Under pressure from Erdogan - aiming to boost growth through higher production and exports - the central bank lowered its policy rate by 500 basis points to 14% since September.

However, despite the easing, the Treasury's benchmark 10-year bond yield hit a record peak of 24.87% last week before ending on Friday at 24.55%.

According to a Brown Brothers Harriman note: "Until a monetary policy anchor is established, we believe the government's efforts to avoid a crisis are doomed to failure."

On the political front, opinion polls show ebbing support for Erdogan and his AK Party. Analysts say presidential and parliamentary elections, set for June 2023, could come earlier as he looks to capitalise on any upswing in support which he hopes his policies will bring.

Atilla Yesilada from Istanbul Analytics said in a note he expected Erdogan to announce early elections in June, with a 65% probability. There was a 25% probability of a September-October election and a 10% probability of it happening as scheduled next year, he said.

https://www.reuters.com/markets/rates-b ... 022-01-10/

[Anthea]

Erdogan vows to tame inflation

President Tayyip Erdogan promised on Wednesday to tame Turkey's surging inflation, which hit 36% last month, but economists predicted it could push much higher, piling further pressure on the battered lira currency

The lira shed 44% of its value in 2021, its worst performance in Erdogan's near two decades in power.

It stood at 13.31 against the dollar at 1705 GMT, up from Tuesday's close of 13.8. Earlier on Wednesday it had rallied as far as 4.7% to 13.15, its strongest level in more than a week, though it was not immediately clear why it had firmed so much.

Thanks in part to costly state interventions in the currency market and to government measures that helped calm a full-blown crisis last month, the lira had largely held in a 13.7-13.94 range since last Thursday.

Speaking in parliament, Erdogan said Turkey was protecting its economy against what he called attacks and had taken under control "foreign financial tools that can disrupt the financial system".

"The swelling inflation is not in line with the realities of our country," Erdogan said, adding that the government's measures would soon soften the burden of "unjust" price hikes.

Under pressure from Erdogan, who seeks higher growth by boosting production and exports, the central bank has slashed its policy rate by 500 basis points to 14% since September. It holds its next rate-setting meeting on Jan 20.

Goldman Sachs said in a research note it expected annual inflation to exceed 40% in January, after which it could surpass 50% and remain elevated until the end of the year, when base effects would lower it to around 33%.

"The deeply negative real rates and the high level of loan growth are likely to keep inflation elevated and continue to put pressure on the lira," the Wall Street bank said.

ECONOMIC GROWTH

Despite the recent market volatility, Turkey's economy is estimated to have grown by a hefty 9.5% in 2021, the World Bank said in its latest Global Economic Prospects report, as it rebounded from the coronavirus pandemic and related lockdowns.

But the bankalso forecast that growth would slow to 2.0% this year and 3.0% in 2023. In its previous report last June, it had seen growth of 5.0% in 2021 and 4.5% in both 2022 and 2023.

Turkey's $720-billion economy grew 0.9% in 2019 and 1.8% in 2020, weighed down by a recession triggered by a separate currency crisis and later by the pandemic.

After the lira slumped to a record low of 18.4 against the dollar in late December, Erdogan announced a scheme to encourage savers to convert foreign exchange deposits, compensating depositors for any losses due to lira weakness.

On Tuesday Turkey added corporate accounts to the scheme, which the Treasury says has attracted some 108 billion lira ($7.8 billion) of deposits. read more

Goldman Sachs said it expected Turkish authorities to attempt "more administrative and regulatory measures" to curb inflation before making an eventual monetary policy U-turn.

But Carlos de Sousa, EM debt portfolio manager at Vontobel Asset Management, said he did not see rate hikes any time soon.

"This time is different. Erdogan has finally got tired (of having high interest rates)," he said.

($1 = 13.8134 liras)

https://www.reuters.com/markets/europe/ ... 022-01-12/

[Anthea]

Turkish Inflation Hits 54%

Turkish prices rose at their fastest rate in 20 years in February as the lira tumbled and food and energy prices surged, stirring discontent about the state of the economy, the Financial Times reports

“President Recep Tayyip Erdogan, who calls himself an ‘enemy of interest rates,’ triggered a collapse in the currency at the end of last year when he ordered the central bank to aggressively cut borrowing costs despite soaring inflation.”

https://politicalwire.com/2022/03/03/tu ... n-hits-54/

[Anthea]

Turkish inflation hits 61.1 %

Turkey's inflation has soared to a new record, official data showed Monday, partly due to President Recep Tayyip Erdogan's unorthodox interest rate policy

Exacerbating a cost of living crisis, consumer prices accelerated to 61.14 percent at an annual rate, up from 54.4 percent in February, according to the statistics agency.

The weakening lira and runaway inflation have become major sources of public discontent in Turkey as President Recep Tayyip Erdogan faces an election next year.

Turkey has recorded double digit inflation since early 2017 but the latest figure is the highest since the ruling Justice and Development Party (AKP) came to power in 2002.

The currency was stable following the latest inflation data, trading at 14.7 lira against the dollar and 16.2 lira against euro.

The war in Turkey's Black Sea neighbourhood has had a major impact on the country as Russia is a key supplier of energy while Ukraine ships wheat. Turkish tourism industry also mainly relies on Russian tourists.

On Friday, S&P global rating agency kept a negative outlook on Turkey and cut its credit rating.

"The fallout of the Russia-Ukraine military conflict, including rising food and energy prices, will further weaken Turkey's already tenuous balance of payments and exacerbate inflation," it said.

The biggest price increases in March were in transportation and food prices, according to the statistics agency.

-'Be patient'-

While countries around the world are facing rising inflation as energy prices have soared while economies emerge Covid restrictions, Turkey's problems have also been affected by Erdogan's unorthodox economic approach.

The Turkish leader rejects the idea that inflation should be fought by hiking the main interest rate, which he believes causes prices to grow even higher -- the exact opposite of conventional economic thinking.

Turkish central bank "policies are just not working in countering inflation," said Timothy Ash, emerging markets strategist at BlueBay Asset Management.

"Indeed, I think the overwhelming consensus is that the unorthodox policy settings of the CBRT (central bank) are a major cause of inflation," he said in a note to clients.

On Saturday, Erdogan said increase in food and energy prices triggered by the war in Ukraine "is affecting us too."

"We are fighting against those who are charging unreasonably high prices," he said.

"There are problems we need to address ... I ask you to be patient and trust us," in reference to people squeezed by the biting inflation.

In January, Erdogan changed the head of the state statistics agency.

Turkish media reported that he was unhappy with the inflation figures it published while the opposition believes that the official figures grossly underestimate the reality.

Jason Tuvey, senior emerging markets economist at the London-based Capital Economics, said inflation was likely to rise further over the coming months and stay close to the current high rates for much of this year.

"But there is still little sign that the central bank and, crucially, President Erdogan are about to shift tack and hike interest rates," he said.

https://www.rudaw.net/english/middleeas ... y/04042022

[Anthea]

Cost of food in Turkey increased 70.33%