{"id":19326,"date":"2020-08-14T01:14:16","date_gmt":"2020-08-13T22:14:16","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=19326"},"modified":"2020-08-14T01:14:16","modified_gmt":"2020-08-13T22:14:16","slug":"turkeys-finance-minister-concedes-economy-at-risk-of-shrinking","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/19326","title":{"rendered":"Turkey\u2019s finance minister concedes economy at risk of shrinking"},"content":{"rendered":"

Turkey\u2019s economy is in danger of contracting this year after the coronavirus pandemic hit economic activity in the second quarter, the country\u2019s finance minister has said, acknowledging that his previous forecast of a 5 per cent expansion was no longer within reach.<\/span><\/h3>\n

Berat Albayrak told a Turkish television channel that this year the country\u2019s economy could shrink by up to 2 per cent, or expand by a maximum of 1 per cent. But estimates from international institutions for an even sharper contraction were baseless, he said in the interview late on Wednesday evening.<\/span><\/p>\n

The IMF forecasts that the Turkish economy will contract by 5 per cent in 2020, while the World Bank\u2019s baseline scenario is for a 3.8 per cent fall.<\/span><\/p>\n

Mr Albayrak said the sharp decline in the lira had made Turkey more competitive in attracting tourists and selling goods overseas, adding that he was not worried about the exchange rate. The currency has lost about a fifth of its value against the dollar this year.<\/span><\/p>\n

Goldman Sachs estimates that Turkey spent about $65bn of its central bank foreign currency reserves in June and July on efforts to keep the currency stable, but since the start of August it appears to have abandoned the attempt.<\/span><\/p>\n

The central bank has rebuffed calls to raise its benchmark interest rate to stem the lira\u2019s losses. It will confront the dilemma when it holds its next monetary policy committee meeting, in a week\u2019s time.<\/span><\/p>\n

Earlier this week President Recep Tayyip Erdogan called for interest rates to fall further. He subscribes to the unconventional view that higher interest spurs inflation.<\/span><\/p>\n

\u201cThere is a very important paradigm shift now with a competitive<\/span>
\nexchange rate, low interest rates and most significantly, a<\/span>
\ntransformation that is based on production, not imports,\u201d said Mr<\/span>
\nAlbayrak, who is Mr Erdogan\u2019s son-in-law.<\/span><\/p>\n

In a move which some analysts said was intended to buffer the lira, the Turkish central bank has recently hiked banks\u2019 funding costs.<\/span><\/p>\n

Late last week it scrapped its usual one-week repo operation priced at the policy rate of 8.25 per cent. On Thursday the bank instead held a one-month repo auction at which lenders set the rate through their bids at 271 basis points above 8.25 per cent according to Bloomberg.<\/span><\/p>\n

\u201cThe [central] bank is trying to rein in lending\u2009.\u2009.\u2009.\u2009without hiking the base<\/span>
\nrate,\u201d Timothy Ash, an analyst at BlueBay Asset Management, wrote in a<\/span>
\nresearch note.<\/span><\/p>\n

The supply of credit has risen sharply since the government compelled banks to increase lending. Regulators this week also took other steps to cool lending, including reducing the loan-to-asset ratio for banks.<\/span><\/p>\n

But letting the lira weaken \u201cis essentially a muddle-through scenario\u201d, Mr Ash said: \u201cClearly the central bank does not want the ignominy of being forced to hike the base rate [and] it\u2019s not even clear they would get approval from the president for such a move\u2009.\u2009.\u2009.\u2009unless the lira is in freefall.\u201d<\/span><\/p>\n

Mr Albayrak rebuffed suggestions that Turkey needed a higher interest rate to support portfolio inflows, arguing that net flows have been negative for the past two years. Foreign investors have sold about $12bn of Turkish assets over the past year, according to Bloomberg.<\/span><\/p>\n

\u201cThe exchange rate will rise today, fall tomorrow\u2009.\u2009.\u2009.\u2009What is important is that Turkey manages the volatility,\u201d Mr Albayrak said.<\/span><\/p>\n

He blamed \u201ccrisis lobbies\u201d for portraying the currency as under siege and said that the lira\u2019s decline would have only a limited impact on inflation, which is running at an annual rate of about 12 per cent.<\/span><\/p>\n

Turkey\u2019s economy needs to become more independent in order to cope with divergences with the country\u2019s traditional allies over foreign policy, Mr Albayrak said, adding that overseas military excursions had put pressure on the public finances.<\/span><\/p>\n

Tax revenue fell to zero for four months this year because of coronavirus, and Turkey is likely to record a budget deficit of about 5 per cent of GDP this year, he said. But he reiterated that Turkey would not seek assistance from the IMF.<\/span><\/p>\n

 <\/p>\n

Source: link<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Turkey\u2019s economy is in danger of contracting this year after the coronavirus pandemic hit economic activity in the second quarter, the country\u2019s finance minister has said, acknowledging that his previous forecast of a 5 per cent expansion was no longer within reach. Berat Albayrak told a Turkish television channel that this year the country\u2019s economy<\/p>\n","protected":false},"author":1,"featured_media":19327,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-19326","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19326","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=19326"}],"version-history":[{"count":2,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19326\/revisions"}],"predecessor-version":[{"id":19329,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/19326\/revisions\/19329"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/19327"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=19326"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=19326"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=19326"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}