My subscription
...
Filters
My Subscription All Publications

Turkey: threat of currency crisis continues to grow

The Turkish lira has remained under significant pressure at the start of this week and there is a growing risk that the central bank’s continued obedience to pressure from President Erdogan for interest rate cuts results in sharp and disorderly falls in the currency over the coming days and weeks. That would cause inflation to rise even further and broader financial conditions to tighten. Strains would also build in the banking sector and, while it would require a prolonged bout of market stress before a wave of bank defaults became a serious threat, a credit crunch would almost certainly ensue.
Jason Tuvey Senior Emerging Markets Economist
Continue reading

More from Emerging Europe

Emerging Europe Economics Weekly

Governments collapse, Russia set to default

Governments in Israel and Bulgaria collapsed this week which may delay support to households over the cost of living. The threat to Bulgaria’s economy is probably greater, as political instability also puts EU fund inflows and the ability to secure gas supplies at risk. Elsewhere, a 30-day grace period for Russia’s government to make interest payments on Eurobonds ends on Sunday. While Russia has signalled that it is willing to make the payments in rubles, this would be a breach of the contract and could mark Russia’s first default on foreign currency debt since the Bolshevik revolution.

24 June 2022

Emerging Europe Economics Update

CBRT: knock knock, anybody there?

High inflation, falls in the lira and aggressive monetary tightening elsewhere are clearly not enough to persuade Turkey’s central bank to lift interest rates, as it left its policy rate at 14.00% today. Disorderly falls in the lira are a major risk, which would probably be met with capital controls rather than rate hikes.

23 June 2022

Emerging Europe Economics Update

CEE inflation broadening out

Central and Eastern European economies are experiencing their worst bout of inflation since the late-1990s as surging food and energy prices have added to strong core price pressures across a broad range of goods and services. Monetary tightening cycles are likely to continue with interest rates rising to 8% or so over the next few months and we think that rates will remain above neutral for several years. World with Higher Rates - Drop-In (21st June, 10:00 ET/15:00 BST): Does monetary policy tightening automatically mean recession? Are EMs vulnerable? How will financial market returns be affected? Join our special 20-minute briefing to find out what higher rates mean for macro and markets. Register now  

20 June 2022

More from Jason Tuvey

Emerging Europe Economics Update

All eyes on CBRT as Turkish lira continues to tumble

There has been no let up for the Turkish lira today and all eyes are turning to the central bank’s interest rate decision tomorrow. Policymakers’ increased tolerance to falls in the lira as well as pressure from President Erdogan mean that an interest rate cut of 100bp or so still seems likely but a much larger reduction would clearly send Turkish financial markets into a tailspin. Even a hold (or a rate hike) may only provide short-term relief for the currency as much will then depend on the president’s reaction and whether he decides to part ways with another central bank governor.

17 November 2021

Middle East Data Response

Saudi Arabia Consumer Prices (Oct.)

Saudi inflation edged higher to 0.8% y/y in October and will probably continue to drift upwards over the coming months. Overall, though, we expect price pressures to remain subdued, at 1.0-2.0% over the course of 2022-23, compared with many other parts of the world.

15 November 2021

Emerging Europe Data Response

Turkey Industrial Production & Retail Sales (Sep.)

Turkey’s activity data for September were the proverbial mixed bag with industrial production falling back but retail sales putting in another robust performance. On balance, the data suggest that Turkey’s economy expanded by around 1.5% over Q3 as a whole.

12 November 2021
↑ Back to top