Page 39 - bne_Magazine_October_2017

bne October 2017 Southeast Europe I 39
fiscal pump-priming, with the Ministry of Finance today suggesting that the budget deficit this year is likely to double to TRY60bn, and then the central bank which has moved back to a more ortho- dox monetary policy holding its average funding rate back around 12%.”
Additionally, analysts who are far more optimistic about the impact of the CGF than Robertson, have highlighted how the fund will only cover lending risk while a bank’s non-performing loan (NPL) ratio is below 7%. That in itself should keep lenders on the straight and narrow, they say. The current NPL ratio for Turkish bank lending to SMEs is around 4.5-5%.
Ash likes the look of Turkey’s cheap lira at around 3.5 to the dollar, with the real effective exchange rate still back at 2003 levels, something which has helped on the balance of payments front, under- pinning portfolio inflows. He is also encouraged by the long-term under- pinnings provided by strong banks, favourable demographics and Turkey’s pro-business culture and sound public finances.
But, on the downside, London-based Blackfriars Asset Management advised clients in early August that while it is positive on Turkey it has to pose the question: “Does the government has any more cards up its sleeves to keep this rally going into 2018?” The CGF has undoubtedly played a pivotal role in the stock market boom by boosting bank stocks. The bourse’s benchmark index, the BIST 100, is bank heavy, at around 50% banking.
Given Turkey’s political strife – the
state of emergency introduced after the foiled coup of July 2016 is still in effect, allowing Erdogan to rule by decree – and the wider regional geopolitical strife also unnerving investors, many analysts expected the country to struggle eco- nomically this year. But – again substan- tially thanks to the CGF – the Turkish economy grew 5% y/y in Q1, picking
up from the 3.5% rebound seen in the previous quarter after the 1.3% slump experienced in the third quarter of 2016, data from national statistics office TUIK showed on June 12.
Turkey’s decision to buy Russian missile- defence system alarms Washington
bne intellinews
Washington strongly objected to a Turkish deal to buy Russia's most advanced missile-defence system, the S-400 at the start of September.
Turkish President Recep Tayyip Erdogan announced that Ankara had signed
a contract with Russia to buy the surface-to-air system and had paid a deposit, even though the loan arrangement was yet to be entirely worked out.
The problem is Turkey has been a Nato member since the 1950s and is obliged to keep its military equipment aligned with the other Nato members. Russia is currently Nato’s number one threat, following Russian president Vladimir Putin’s aggression in Ukraine.
“A Nato interoperable missile-defence system remains the best option to defend Turkey from the full range of threats in its region,” Pentagon spokesman Johnny Michael said on September 12, according to Sputnik.
“Turkey continues to pursue anti-missile systems from Nato allies, including the US, for its broader, long-term missile defence needs. The United States is committed to expediting the delivery of equipment purchased by Turkey, when possible,” Michael also commented.
Russia has confirmed the arms deal worth $2.5bn, according to some reports. “The contract has been signed and it is about to be executed,” Russian President Vladimir Putin’s aide for military-technical cooperation Vladimir Kozhin told Tass on September 12.
“I can merely guarantee that all of the decisions made under this contract strictly agree with our strategic interests. In that connection we find quite natural the reaction of some western countries that have been trying to put pressure on Turkey,” Kozhin said.
Turkey has also started talks with China Precision Machinery Import and Export Corp (CPMIEC) on buying a missile-defence system in September 2013, but opted not to sign the final deal following Nato’s objections. China is also not an Nato member and is increasingly closely aligned with Russia. The two countries have recently held joint military exercises on both Russia’s Pacific and Atlantic coasts.
The missile deal was announced with relations between Turkey and its Western allies, notably with the USand Germany, at a low point.
www.bne.eu