Page 31 - Turkey Outlook 2023

5.0 Fiscal policy outlook

A black hole

If Turkey were to launch a serious process to reverse what
is a decade of institutional collapse, it would require at
least five years of earnest and sincere efforts to get
somewhere.

Addressing the financial mess and burden created by
Turkey’s mass of public private partnership (PPP) projects
would also take at least 10 years.

The central bank’s net FX position remains at about minus
$50bn.

6.0 Markets outlook

6.1 FX

The USD/TRY pair moved up 35% y/y to the 18.60s in 2022, following a
79% rise in 2021.

The government is aiming to exert control over the exchange rate
through to the elections. A smooth and limited devaluation is currently
on the cards as the exporters are wincing again. So far, the government
has rejected the calls from exporters for an even weaker lira.

Turkey’s government seizes 40% of export and tourism revenues.
Those companies that want to use export rediscount credits from the
central bank are obliged to sell 70% of their export revenues and to
sign a document declaring that they will not buy FX for the following
one month.

Banks are also obliged to inform the central bank when they transfer
money abroad. The central bank, meanwhile, closely follows FX
transactions on the interbank money market. It limits transaction hours.
The authorities also directly call companies to push them to sell some
FX or cancel purchase orders.

Turkey’s trade and current account balances are always in deficit and
the country’s external liabilities are heavy. So, intermediary goods
importers face difficulties in finding FX. A tightening cycle here is still
working through.

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