Turkey

Textile and leather goods' makers in Istanbul's garment district are feeling the impact of Russia's invasion of Ukraine as customers in Moscow and Kyiv have canceled $200 million in orders in the past week, industry officials say, Reuters reported. The loss of trade adds to strains on Turkey's economy, with officials estimating that more than $1 billion is directly at risk to the textile industry alone if the conflict in Ukraine continues.

Turkey’s central bank left its key interest rate unchanged for a second consecutive month, pausing the government’s policy of interest-rate cuts that triggered a chaotic slide in the value of the lira last year, the Wall Street Journal reported. The bank’s monetary policy committee said Thursday it left the benchmark interest rate on hold at 14%, in line with market expectations. In a statement, the bank cited “increasing geopolitical risks” in a possible reference to the crisis over nearby Ukraine.

A possible Russian invasion of Ukraine is threatening to deepen a continuing economic crisis in nearby Turkey, which faces the prospect of soaring energy prices and disrupted trade with its two Black Sea neighbors in the event of war, the Wall Street Journal reported. Turkey’s economy has already been shaken by inflation that is among the highest in the world, after a series of unorthodox economic steps and a collapse of the currency’s value over the past year. Turkey is dependent on imported Russian oil and natural gas, as well as tourists from both countries.

Turkey will announce a new scheme on the weekend to encourage households to convert their gold holdings into liras, finance minister Nureddin Nebati told investors in London on Tuesday, Reuters reported. Two investors who attended meetings with Nebati in London said the minister had told them about the plans to ensure part of the $250-$350 billion worth of gold held by Turkish households would find its way into the domestic saving system. "They will make announcements this weekend on how to convince people to let go of their gold holdings – it is a huge amount in Turkey," said on investor.

Turkey is preparing to return to global bond markets for the first time since the lira’s implosion, Bloomberg News reported. The nation has picked banks including HSBC Holdings Plc to manage a sale of Islamic debt, known as a sukuk, which could happen this month. The sale may be used to refinance about $2 billion of debt maturing this month. The last time Turkey turned to foreign investors with a bond sale was in September, before President Recep Tayyip Erdogan’s insistence on cutting interest rates despite high inflation sent the currency into a tailspin.

A real rate of minus 35% and little prospect of a rate hike by the Turkish central bank can only mean more losses for the beleaguered lira, Bloomberg News reported. Traders see a probability of almost 50% that the lira will surpass its record low of 18.3633 per dollar by the end of the year, according to Bloomberg calculations based on prices of put and call options. The currency slumped as much as 1.2% Thursday before paring its drop to trade at 13.5772 as of 2:08 p.m. in Istanbul.

Turkey President Recep Tayyip Erdogan promised the country would continuing cutting interest rates, suggesting that lower inflation will follow, Bloomberg News reported. “We will lower interest rates as we have done already,” said Erdogan, after the Turkish central bank halted a rate-cut cycle this month that trimmed 500 basis points from the benchmark rate since September. The aggressive easing cycle was accompanied by runaway inflation, which has caused an outcry among Turks who’ve witnessed a deep erosion of their purchasing power in a few months.

Turkish Finance Minister Nureddin Nebati told economists he expects the inflation rate to peak at about 40% in the months ahead and not to surpass 50% this year, Bloomberg News reported. Nebati provided his most detailed outlook yet for consumer prices in 2022 during a meeting with 60 economists and analysts on Saturday in Istanbul. The minister said the inflation rate may not fall below 30% until the end of the year. Turkey’s inflation rate hit 36.1% in December, the highest since the beginning of President Recep Tayyip Erdogan’s 19-year rule.

Some Turkish manufacturing companies have halted production temporarily after Iran cut gas flows last week for up to 10 days due to a technical problem, Reuters reported. Companies affected include car parts maker Ege Endustri , cardboard manufacturer Kartonsan and defence and automotive parts maker Katmerciler. Turkey is almost fully dependent on imported gas from Russia, Azerbaijan and Iran, which suspended gas flows to the country last Thursday, saying there was a technical fault at a pressure-boosting station in Turkey.

Turkey’s central bank kept its benchmark interest rate unchanged Thursday, pausing a cycle of rate cuts and launching an “open-ended” policy review after inflation surged to its highest level since the beginning of President Recep Tayyip Erdogan’s 19-year rule, Bloomberg News reported. The Monetary Policy Committee, led by Governor Sahap Kavcioglu, held its one-week repo rate at 14% as forecast by all 20 analysts surveyed by Bloomberg, in its first meeting since inflation hit a record 36.1%.