Page 13 - TURKRptMar22

Despite the easing monetary conditions, economic activity has not responded positively. Europe has also endured a slowdown since the beginning of 2022.
Meanwhile, the government is seizing 25% of export revenues. Turkey’s trade balance is always in deficit and its external liabilities are heavy. So, intermediary goods importers are facing difficulties in finding FX. The tightening cycle here is still working through.
Despite the ‘switching off’ of much industrial production, saving on energy and intermediary goods imports bills, the trade deficit came in at a record high of $10.4bn in January. In February, the deficit remained high at $8bn. March will also come high.
FX derived from exporters is burnt to face FX demand and keep the USD/TRY stable.
● USD/TRY: Latest record - 18.8760 recorded on December 1.
Since the Putin regime shook up global markets by launching a full-blown invasion of Ukraine on February 24, the Erdogan regime has been struggling to keep the USD/TRY pair below the 14-level. It has still not lost control, but it has been burning through the reserves again, sending high volumes up in smoke.
Money is flowing on to the central bank's balance sheet from exporters, but its reserves are declining.
The Erdogan regime kept USD/TRY stable at 6.80 in the summer of 2020 and then it recognised that there were no reserves left. The magical fixed rate was 5.85 in 2019.
Each of the regime’s FX rate-fixing adventures ends in tragedy when the palace is told that there are no more reserves left to burn.
Turkey’s 5-year credit default swaps (CDS), meanwhile, hit 650 on March 4, the highest figure seen since 2008. The yield on the Turkish government’s 10-year eurobonds reached 9.2%.
● Balance of Payments: Current account deficit is turning wild again and hopes are pinned on tourism revenues in the summer.
Financial flows stopped; as a result, they are stable. There is not much hot money left. The game is played out only among locals. Turks are calm after the USD/TRY rate stabilised around the 14-level.
13 TURKEY Country Report March 2022 www.intellinews.com