Page 32 - Turkey Outlook 2023

FX derived from exporters and tourism companies is burnt to contend
with FX demand and keep the USD/TRY stable.

The government is, meanwhile, introducing additional capital controls to
prevent companies from buying FX or importing goods with loans.

The capital controls are not proving enough. Some desperate attempts
to find some fresh FX are taking place.

In May, a limited recovery in external balances was expected as gas
bills were set to decline and the tourism season was to begin. However,
a record $11bn trade deficit was reported for May.

For 2022, a record trade deficit that would stand above $100bn was on
the way as a $100bn deficit was reported for January-November.

The central bankers, meanwhile, worked harder to write bigger tourism
revenues.

Neverthless, the current account deficit ran wild again.

Financial flows stopped; as a result, they are stable. The Turks are
relatively calm as the USD/TRY rate has remained more or less fixed
for two months.

Debt rollovers continue undeterred, but with no fresh inflows. Net FDI
remains around zero.

The unidentified flows channel plays its big role as usual. “Friendly
countries,” including Russia, Qatar, the UAE and Saudi Arabia, are
providing Turkey’s government with hard currencies.

6.2 Stocks

For investors who are not short-term professional 'hit-and-run' types,
there is little attraction in attempting steady investment on the Borsa
Istanbul.

The biggest “bull trap” (keriz silkeleme in Turkish) operations in the
history of Borsa Istanbul continue apace.

6.3 Bonds

Turkey’s five-year credit default swaps (CDS) remain below the
600-level. The yield on the Turkish government’s 10-year eurobonds
remains below the 10%-level.

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