Turkey

Turkey’s central bank held off from cutting interest rates on Thursday as the lira comes under pressure and the economy absorbs the fallout of last month’s catastrophic earthquakes, Bloomberg News reported. The Monetary Policy Committee led by Governor Sahap Kavcioglu left the one-week repo rate at 8.5%. The decision was in line with its guidance that the benchmark was at an “adequate” level following a half-a-percentage point decrease in February, a view the central bank reiterated in its statement on Thursday.
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The two major earthquakes which hit Turkey on Feb. 6 caused about $34.2 billion in direct physical damage, but total reconstruction and recovery costs facing the country could be twice as high, the World Bank said on Monday, Reuters reported. The bank estimates that the earthquakes would also shave at least half a percentage point off Turkey's forecast gross domestic product growth of 3.5% to 4% in 2023, Humberto Lopez, World Bank country director for Turkey, told reporters.
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Turkey’s central bank has warned lenders in the country against sending dollars to their correspondent counterparts abroad, according to people familiar with the matter, its latest move to try to protect the lira, Bloomberg News reported. The request comes after commercial banks wired a net $2.3 billion to deposit accounts abroad in the first six weeks of the year, one of the people said, asking not to be named because the information is confidential. Hard-currency outflows are hampering efforts to keep the lira stable and inflation in check in the run-up to elections slated for May.
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Turkey’s central bank surprised with a smaller interest-rate cut than forecast after the country’s worst earthquake disaster in decades, signaling further monetary easing is now less likely, Bloomberg News reported. After a two-month pause, the Monetary Policy Committee led by Governor Sahap Kavcioglu lowered its one-week repo rate to 8.5% — the lowest in three years — from 9%. Most economists surveyed by Bloomberg expected a full percentage-point reduction. The Turkish lira weakened slightly after the decision.
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Bankers said that Turkey's central bank used $7 billion of reserves in the last two weeks to help steady the lira in the aftermath of devastating earthquakes, and reserves could remain under pressure in the weeks ahead, Reuters reported. The worst disaster in Turkey's modern history killed tens of thousands and levelled areas of the south, temporarily closing the stock exchange. But in foreign exchange (FX) markets, the lira has shed only 0.2% versus the U.S. dollar since the initial quake on Feb. 6.
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Damages from deadly earthquakes in Turkey last week will probably exceed $20 billion, the risk modelling company Verisk estimated on Tuesday, Reuters reported. Only a fraction of the damages - likely more than $1 billion - is covered by insurance, Verisk said. The figures come on top of the enormous loss of life from the disaster, with the death toll having risen to 31,974 by Tuesday. Earthquakes are relatively common in Turkey, and despite regulations to build to protect against earthquakes, results have been "mixed", Verisk said.
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The World Bank said on Thursday it is providing Turkey with $1.78 billion in relief and recovery financing assistance as the country struggles with the aftermath of an earthquake that has killed over 20,000 people and left hundreds of thousands homeless, Reuters reported. The World Bank said in a statement that $780 million will become available for Ankara immediately, as the funds will be diverted from two existing World Bank loan projects in Turkey.
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A daunting economic landscape will exacerbate the humanitarian catastrophe wrought by a pair of earthquakes on Turkey, as early estimates of the damage point to mounting inflation and budget risks, Bloomberg News reported. Turkey has suspended trade on its main stock stock exchange following a sharp drop and the lira remains propped up by support measures. Meanwhile, Turkish financial assets whose movements remain unrestricted largely stabilized, with some even appreciating on Thursday.
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President Tayyip Erdogan declared on Tuesday a three-month state of emergency covering Turkey's 10 southern provinces hit by devastating earthquakes, and called it a disaster zone in a move meant to bolster rescue efforts, Reuters reported. The move came as the death toll from Monday's two major earthquakes, which hit a wide area of Turkey and Syria, exceeded 5,000 and as rescuers raced against time to dig people out of the rubble of collapsed buildings.
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Turkey’s central bank is considering a measure to deter lenders from selling currency derivatives to their customers, the latest effort to curb growing corporate demand for dollars, Bloomberg News reported. The monetary authority is designing a new regulation to require banks to hold collateral for forward contracts, with the goal of ultimately cooling off demand for hard currency in the spot market, according to people familiar with the discussions.
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