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triggered by last year's currency turmoil.
In August, the central bank made a similar move, reducing the required reserves ratio for banks with loan growth rates above 10% and raising the return on those reserves.
The lira was 0.35% lower against the dollar, trading at 5.7208 per dollar as of around 23:40 Istanbul time on September 23.
White goods sales in Turkey fell by 8% on an annual basis to 617,000 units in August, data from business group TURKBESD showed on September 23.
The data included sales of refrigerators, washing machines, dish washers and ovens.
The contraction in the market was a sharper 31% y/y in July.
White goods production dropped 3% in August compared to the same month of 2018 to 2.24mn units while exports by local appliances companies rose 3% on an annual basis to 1.85mn units.
According to TUKSBESD, white goods sales plunged 12% in January-August from a year ago while exports showed a limited 2% increase.
Local sales have been declining since June when tax reductions that the government granted for white goods expired. Given the situation with the budget deficit, the government is unlikely to announce such tax cuts in the remainder of the year.
However, in the wake of the central bank’s 750 bp cut in its benchmark rate brought in over two months, lenders have reduced interest rates on consumer loans, something which may help drive a white goods market recovery.
The Organisation for Economic Cooperation and Development (OECD) has projected in its September Interim Economic Outlook (IEO) report that the Turkish economy will contract only 0.3% in 2019. In its May IEO, it projected a 2.6% contraction.
IMF sharply raises Turkey growth forecast but says calm on country’s financial markets looks “fragile”. The International Monetary Fund (IMF) on September 23 sharply raised its forecast for Turkey’s economic growth this year from -2.5% to 0.25% but at the same time said of the country’s post- currency crisis financial markets that the “the current calm appears fragile”.
In a report released after the annual visit to Turkey paid by its staff, the IMF cited anxieties about bad debts in the country’s corporate sector, low foreign currency reserves and heavy reliance on foreign financing, as well as a new problem, namely a growing fiscal deficit.
“Growth has rebounded, aided by policy stimulus and favourable market conditions, following the sharp lira depreciation and associated recession in late-2018,” the IMF said. “The lira has recovered and the current account has seen a remarkable adjustment.”
However, the institution said Turkey “remains susceptible to external and domestic risks” while “prospects for strong, sustainable, medium-term growth look challenging without further reforms”.
Ramping up credit supply. The IMF also took the view that the central bank’s decision to slash rates by 750 bp since July was “too aggressive”. It further advised that the reduction made in reserve requirements for banks that meet certain lending targets “should be revisited”.
Attempts to expand lending, the IMF said, “should be limited and should also
20 TURKEY Country Report October 2019 www.intellinews.com