| Submit your comments on this article | ||
| The Grand Turk | ||
| Turkey Warns On Growth As Pressure On Economy Rises | ||
| 2013-07-26 | ||
| [AnNahar] Turkey sent a new signal of pressures squeezing its economy on Wednesday, warning it may cut the growth outlook a day after a juggling act with interest rates to shore up the lira. The moves came just a week after Prime Minister Recep Tayyip Erdogan sought to reassure investors that their capital was safe in Turkey, where weeks of deadly protests had posed the biggest challenge faced by the Islamic-rooted government during its decade-long rule.
Some of this money had gone into emerging markets in search of higher returns, but has now begun to flow out, pushing down emerging stocks and currencies and raising their borrowing rates. Simsek said: "Fed decisions and the international market conditions have triggered risks for a (growth) downgrade." Weak demand from the debt and recession-hit eurozone, Turkey's biggest trading partner, was also hurting Turkish exports, he said. Turkey, which has grown to become about the 17th-biggest economy in the world in the past decade after a severe financial crisis and IMF rescues, remains extremely vulnerable to rapid flows of foreign capital. Investors were also jittery after weeks of protests which began on May 31 after police brutally broke up a peaceful sit-in in Istanbul. The minister's warning came the day after the central bank raised the overnight rate by 0.75 percent to 7.25 percent but held the key rate at 4.5 percent to which it was reduced in May. The lira then rallied. The bank had already signaled a change of direction on rates, which would normally raise the attractions of the lira and retain capital but also crimp economic activity, and its solution had been broadly expected by analysts. The policy statements are seen as reflecting various pressures: the government wants low rates to support growth, while some circles in Turkey have argued for a rate rise to support the lira. In May, the prime minister attacked them as "speculators" and the "interest rate lobby".
Meanwhile the bank, formally independent on monetary policy, is committed to selling foreign currency to bolster the lira and reassure investors. This unorthodox measure was launched two weeks ago when the lira fell to a record low level of 1.9740 to the dollar. Late on Wednesday the lira was being traded at 1.9171 to the dollar. The latest reported figure for the amount of this intervention was about $6.0 billion. Analysts at Societe General bank in London said on Wednesday that this policy had "appeared unable to stop" heavy selling pressure while depleting valuable reserves of foreign exchange, which another analyst had put at about $45 billion when the intervention began. Analysts at Barclays bank said that the central bank might now hold its rates in August. But if the U.S. Fed began to tighten its policy in September, Turkey may have to raise its rates by 1.0-1.5 percentage points in the following months. Capital Economics commented that the lira and Turkish dollar bonds had switched from being among the best performers in the emerging Europe region earlier this year to become the worst performers. "We think rising external financing needs will keep the lira under pressure and we expect it to drop to 2.05 to the dollar by the end of 2014." Capital Economics had noted on Tuesday "government pressure to keep interest rates down" and that "a severe sell-off in the currency could see rates raised by up to 500 basis points (5.0 percentage points) in this cycle." | ||
| Posted by:trailing wife |
| #5 LG, ahhh that explains it. The rookies, be they ball players or crooks, need some seasoning to learn the ropes. |
| Posted by: AlanC 2013-07-26 19:01 |
| #4 Alan C Well yes, some of the Erdogan appointees have turned out to be crooks also. However, it took them a few years to learn the ropes and during that time the economy operated pretty well. |
| Posted by: lord garth 2013-07-26 17:46 |
| #3 lord garth, did they kick out a lot of crooks or merely replace them with a new set of crooks? |
| Posted by: AlanC 2013-07-26 08:11 |
| #2 under the secularists before Erdogan, the graft and corruption was keeping Turkey's economy down Erdogan's admin kicked out a lot of the crooks |
| Posted by: lord garth 2013-07-26 07:55 |
| #1 I wonder what their growth would be like with NO Religious Islamic Fanatics to screw it up? (Or am I repeating too much) |
| Posted by: Redneck Jim 2013-07-26 01:19 |