Turkey

Turkey’s current account swung back to a wider deficit than forecast in July after a rare surplus the previous month, as surging gold imports added to a deteriorating trade gap, Bloomberg News reported. The shortfall was $5.5 billion, compared with a revised surplus of $651 million in June and a deficit of $3.5 billion in July 2022, according to central bank data published on Monday. The median estimate in a Bloomberg survey of analysts was for a gap of $4.5 billion in July.

The World Bank is in advanced talks to potentially double its exposure to Turkey to $35 billion to help stabilize the Middle East’s largest non-oil economy, Bloomberg News reported. The discussions include a World Bank pledge of as much as $18 billion for projects over the next three years, in addition to more than $17 billion in programs already in place, the people said, asking not to be named because the talks aren’t public. The funding would include direct lending to the government as well as support for the private sector.

As the lira was approaching a decade of continuous losses, Turkish policymakers hit on an idea that promised a quick fix, and it helped stave off another currency crisis. But nearly two years on, a government-backed savings program — which protects lira deposits from depreciation against hard currencies — has become too big to unwind and too dangerous to live without., Bloomberg News reported.

Turkey’s new central bank governor delivered a sobering assessment on inflation but pledged to stick with a “gradual” cycle of monetary tightening despite more than doubling the forecast for price gains, Bloomberg News reported. At an event on Thursday that marked her public debut, Governor Hafize Gaye Erkan had the task of restoring the credibility of an institution in need of rehabilitation in the eyes of the markets after years of unconventional measures championed by President Recep Tayyip Erdogan. Erkan, appointed last month after long stints in the US at Goldman Sachs Group Inc.

Turkey’s central bank has rolled out new measures to curb credit-card spending and limit loans to some industries as it leans on backdoor tightening to get a grip on inflation without crashing the economy, Bloomberg News reported. Days after a second interest-rate hike that fell short of expectations, policymakers announced rule changes that will make it more costly for consumers to use credit cards for cash withdrawals. The central bank is also imposing a stricter growth limit on car loans and some commercial credit, according to its announcement on Tuesday.

Turkey will continue its monetary policy U-turn, which began with a sharp post-election rate hike last month, until the inflation outlook improves significantly, the central bank said on Monday, Reuters reported. The hawkish policy guidance came as data showed the central bank's net foreign reserves recorded their biggest weekly leap on record as the bank eased off interventions in the currency market to stabilise the lira.

Turkey's central bank hiked its key rate by 650 basis points to 15% on Thursday and said it would go further in a reversal of President Tayyip Erdogan's policy, although the post-election tightening missed expectations and the lira fell, Reuters reported. In its first meeting under new Governor Hafize Gaye Erkan, the bank changed course after years of monetary easing in which the one-week repo rate had dropped to 8.5% from 19% in 2021 despite soaring inflation. Analysts said that the move suggested Erkan might have limited room to aggressively tackle inflation under Erdogan's watch.

Turkey's newly appointed Finance Minister Mehmet Simsek said on Sunday that the country has no choice but to return to "rational ground" to ensure predictability in the economy, Reuters reported. President Tayyip Erdogan named Simsek to his cabinet on Saturday to tackle Turkey's cost-of-living crisis and other strains, in a clear sign that his newly elected government would return to more orthodox economic policies. In a handover ceremony, Simsek said the main goal of the new government will be to increase social welfare.

Turkey’s markets slid as the nation heads for a runoff election, with stronger-than-expected support for President Recep Tayyip Erdogan wrong footing investors who were betting on a quick end to his unconventional economic policies, Bloomberg News reported. The benchmark stock index, the BIST-100, closed 6.1% lower after earlier falling as much as 6.7%, triggering a circuit breaker. Turkey’s dollar bonds were the biggest losers in emerging markets and the cost of protecting the debt against default jumped.