Turkey

Turkey’s credit score slid deeper into junk as Moody’s Investors Service cut its assessment, citing an increasing risk of a balance of payments crisis and a government default, Bloomberg News reported. Turkey’s long-term issuer rating was lowered to B1 from Ba3 by Moody’s, the rating company said in a statement on Friday. The outlook on the rating is negative. Turkey is now four notches below investment grade, on par with Jordan, Greece, and Uzbekistan. “The balance of risk is firmly tilted to the downside,” Moody’s said.

Turkey’s industrial giants are struggling to keep a lid on soaring finance expenses that are threatening to engulf operating income as the lira’s depreciation pushes up foreign-borrowing costs, Bloomberg News reported. Istanbul’s top 500 industrial firms, which together account for almost half of the nation’s exports, reported finance expenses of 95.8 billion lira ($16 billion) last year, compared with 35.2 billion liras in 2017, according to Istanbul Chamber of Industry Chairman Erdal Bahcivan. The ratio of financial costs to operating profits almost doubled to 88.9%, he said.

Turkey’s battered economy is set to leave recession later this month thanks to a politically-driven surge in bank lending and public spending — but analysts warn that key vulnerabilities remain unaddressed and the recovery is likely to be shortlived, the Financial Times reported. Growth figures due to be published at the end of May are widely expected to show that the country emerged from its first contraction in a decade in the first quarter of 2019.

Turkish banks disagreed on almost everything with potential investors when they met for the first round of talks about unloading a mountain of bad loans, according to people who were at the gathering in Istanbul last week, Bloomberg News reported. The deadlock between potential buyers, including Goldman Sachs Group Inc. and Bain Capital LP, involved the price and structure of any transaction, some of the people said, asking not to be identified because the gathering was private. Attendees couldn’t even agree on the definition of a non-performing loan, one of the people said.

Turkey’s financial markets suffered a new blow on Thursday as the country’s central bank unnerved investors by signalling a growing reluctance to raise interest rates and disclosed a further drop in its foreign currency reserves, the Financial Times reported. The monetary policy decision, along with fresh data that show the country’s foreign currency coffers had dropped $1.8bn last week, deepened worries about the country’s deteriorating financial defences.

Turkey’s Treasury will issue 5-year debt instruments worth a total of 3.7 billion euros to strengthen the capital of state banks, it said on Monday. Last week, Turkish state-owned lenders Ziraat Bank and Vakifbank said they had completed pricing of perpetual bonds, which will be used to strengthen capital, while Kalkinma Bank and Eximbank authorised headquarters to seek loans to boost their capital, Reuters reported. After last year’s currency crisis - in which the lira shed around 30 percent of its value against the U.S.

Turkey’s central bank has bolstered its foreign currency reserves with billions of dollars of short-term borrowed money, raising fears among analysts and investors that the country is overstating its ability to defend itself in a fresh lira crisis, the Financial Times reported. Reported net foreign reserves held by the central bank stood at $28.1bn in early April — a sum that investors already believed was inadequate because of Turkey’s heavy need for dollars to cover debt and foreign trade.

Turkey’s Halkbank will issue debt instruments and borrow in domestic and foreign markets to strengthen its capital base, which was left thinner after the lender provided low-interest loans in the wake of last year’s currency crisis, Reuters reported. The state-run bank said late on Tuesday it plans to issue debt instruments or borrow a total of 2 billion euros and 10 billion liras ($1.74 billion) in the Turkish market, while borrowing 2 billion euros or equivalent abroad, to meet its Additional Tier 1 (AT1) capital requirements.

Turkey’s reform package laid out last week won’t be enough to restore Turkish households’ and foreign investors’ confidence in the lira, one of S&P Global’s top sovereign analysts said on Monday, Reuters reported. Turkey pledged last week to inject almost $5 billion into its state-owned banks to help them cope with an expected rise in defaults following the country’s slump into recession, but the plan has been criticised for being light on detail.

Turkey’s economy is expected to contract in 2019 after a decade of strong growth, and economists are predicting a longer recession ahead after a recent bout of volatility in the lira, a Reuters poll showed on Friday. The Turkish economy contracted 3 percent in the fourth quarter of last year after a currency crisis devalued the lira by nearly 30 percent against the dollar, Reuters reported. It drove inflation to a 15-year high, severely limited companies’ ability to service foreign debt and multiplied bad loans in the banking sector.