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August 17, 2018 www.intellinews.com I Page 3
will not be looking forward to worsening loan default difficulties.
Per Hammarlund, chief EM Strategist at Nordic bank SEB, said in a note that Turkey could still be forced to seek help from the IMF, despite what Albayrak pledged to those listening in on the call.
“A credible commitment to grant the Turkish cen- tral bank monetary policy independence is critical. Unless the government introduces an austerity programme within the next weeks, an event such as sharply higher inflation (likely) or a large fine on Halkbank for violating US sanctions on Iran (possi- ble) could trigger a full-blown balance of payments crisis, followed by a banking crisis. So far, the government has shown few signs of being willing to change course, either on economic policy or in its relations with the US,” wrote Hammarlund.
He added: “The TRY is in for a bumpy ride on the road to the International Monetary Fund (IMF). The CBRT’s [Central Bank of the Republic of Turkey’s] actions this week and agreements with China and Qatar [for capital] may take USD/TRY down to 5.50 or even lower, but without structural reform, the pair could reach 8.00 this year.”
Turkey raises stakes in “economic war” with tariff hikes on US goods
were ordered "within the framework of reciproc- ity in retaliation for the conscious attacks on our economy by the US administration".
A decree signed by President Recep Tayyip Erdogan pushed up the tariffs on cars to 120%, alcoholic drinks to 140% and leaf tobacco to 60%. The already severely embattled TRY went into freefall on August 10 after US President Donald Trump doubled tariffs on Turkish steel and
“There’s denial”
Julian Rimmer, a London-based trader at Investec Bank, was another analyst not buying Albayrak’s package. He said: "There’s denial and a refusal to accept market realities and the fact they will have to hike rates and/or cut spending very sharply. There’s no way of getting round it. It seems like they think they can. The only modicum of encouragement was that he expressed commitment to cutting spending and said they’d already started that."
Further explaining his action plan, Albayrak said that rather than go for an IMF stand-by deal, Turkey would concentrate on foreign direct invest- ment and a review of big projects to improve the efficiency of spending. He did not expect the US to fine Halkbank and the banking system would get the support and additional funding from the state where necessary, he added.
Timothy Ash at BlueBay Asset Management said that considering it was Albayrak’s first such call with investors, he had put in a “decent perfor- mance”.
“I guess the consensus is ‘now deliver’,” he added.
aluminium, seemingly as a response to Ankara’s refusal to arrange the release of American evangelical pastor Andrew Brunson, who is under house arrest charged with espionage and terrorism offences the US claims are groundless.
Tariffs were also increased on US cosmetics,
rice and coal, following the August 14 announce- ment from Erdogan that he was introducing a boycott of American electronics. The day also
saw Turkish environment minister Murat Kurum announce that Turkey would not use US goods in construction projects. Kurum, reported Reuters, said Turkey was going through an economic siege achieved through “speculative moves” in the value of the dollar.