Page 61 - TURKRptMay19

dangerously low—less than 50% of gross external financing needs.
“Turkey could still do it but it also needs luck and a favourable external backdrop. In terms of global liquidity conditions these do look favourable. But two issues [the potential election rerun and the S400 situation] now really worry me.”
Refinancing season progresses undeterred. Despite the new wave of turbulence to hit Turkey, it is notable that Global Capital reported on April 11 in a story entitled “Turkish reforms disappoint, but loans unfazed” that Turkish lenders’ loan refinancing season was progressing undeterred, even if Albayrak’s only numerical promise—providing a TRY28bn ($4.9bn) capital injection for the state banks—left bond investors less than over the moon.
IMF says no reason to believe Turkey “even contemplating” asking for Fund assistance. The International Monetary Fund’s (IMF’s) chief economist said on April 9 there was no reason to believe economically embattled Turkey was “even contemplating” requesting assistance from the institution. Gita Gopinath told a press conference in Washington: “We have no reason to think that Turkey is even contemplating coming to the IMF so that’s where we are at this point.” She, however, added that Turkey’s economy was “certainly under stress.” “In our forecast for Turkey this year there would be negative growth but we are expecting a recovery in 2020. And in fact this recovery is an important part of the element that goes toward the whole global recovery,” Gopinath also told the press briefing.
The IMF trimmed expectations for global growth to 3.3% this year. It added that a return to 3.6% growth next year was “subject to considerable uncertainty” because it rested in part on rebounds in Turkey and another struggling emerging market, Argentina, it said in a report cited by Reuters. The IMF expects Turkey’s economy to contract by 2.5% this year before growing at the same rate next year. It expanded by 2.6% last year, when the Turkish lira lost 30% of its value against the dollar.
Round-up of Turkey’s ‘debt-fooled' economy. Turkish companies are struggling to get off the hamster wheel of debt as foreign borrowings run near record highs due to a plunge in the lira that has driven up the cost of their obligations in dollars and euros, Bloomberg wrote on April 8. Lenders are also pulling back on providing new credit as the financial system comes under increasing pressure from the recession and an inflation rate of almost 20%.
The lira is still down by a third against the dollar since the beginning of 2018. Turkey’s debt thus amounts to 40% of gross domestic product (GDP), exceeding ratios in Eastern Europe’s 10 biggest emerging markets and that of South Africa, which together averaged 22%. Erdogan’s administration has made some efforts to rekindle growth by stoking a credit splurge, leaning on banks to lend at rates barely above inflation. That has bitten borrowers and lenders alike.
$28bn of restructurings sought. Renewable energy company Bereket Enerji Uretim is the latest firm to ask banks to reorganise billions of dollars of loans. It has asked for a restructuring of $5bn of loans, meaning Turkey’s largest companies have either completed or sought at least $28bn of restructurings, up from $18bn a year ago, according to Bloomberg data.
More than half of the liabilities of Turkish companies are to banks based in the country, over double the ratio in 2008, according to central bank data. Non-performing loans (NPLs) as a percentage of total credit rose to 4.11% in February from around 3% at the beginning of 2018.
The energy industry alone in Turkey has more than $51bn in outstanding debt.
61 TURKEY Country Report May 2019 www.intellinews.com