Page 10 - TURKRptFeb20

Previous synthetic loan growth cycles did not increase employment, but ended up producing FX deposits or drawing in imports .
2.4 Official inflation to remain in single-digits, monetary easing to deepen, Teflon lira’s destiny to be watched...
‘Erdoganomics’ foretells inflation and rates in the single digits. It all seems too good to be true. Can the lira really take the strain? Steam has been seen coming out of the government financing and budget engine rooms.
For those with an unerring trust in the foresight of Erdogan, or a jaundiced eye that detects an unhealthy relationship between the powers that be and purportedly purely technocratic state statisticians and central bank regulators, it is clear that policy rates along with inflation will be presented as having fallen into the single digits in the near future and will remain there in 2020 .
On January 16, the central bank cut its benchmark one-week repo interest rate by another 75bp to 11.25%, bringing the CBRT’s easing since July 2019 to 1,275bp. That brought real yields into negative territory given that annual inflation stood at 11.84% in December.
Turkey’s newly negative real interest rates will likely harm the credibility of its central bank, risk hitting investor confidence and amount to a credit negative for banks’ funding, ratings agency Moody’s Investors Service said on January 20.
10 TURKEY Country Report OUTLOOK 2020 www.intellinews.com