Page 6 - TURKRptOct22

According to Erdogan’s guidance, the committee can be expected to deliver 100bp cuts at each meeting.
Turkey’s policy rate remains idle on the sidelines while the government controls the monetary conditions via macroprudential measures and non-capital controls.
As a result of the government sticks at the bankers’ backs, loan costs and loan growth rates are simultaneously declining at the moment. The government calls this “targeted lending,” which critics contend means providing some “lucky” economic actors with cheap loans, while leaving others with no financing option.
“Targeted” can be taken to make no sense when it comes to the lira supply. There is enough lira and there are perfectly suitable global conditions for another major-scale lira crash.
It is not possible to estimate the exact timing of any crash ahead. The government will burn through whatever it can in the FX market before letting the currency plunge into the abyss.
In August, there were some $15bn-20bn of inflows into the country. In September, nothing much was observed. Erdogan’s hunt for FX among the “friendly countries,” said to include Russia, the UAE, Saudi Arabia and Qatar, continues.
Black money has been welcome since 2008 under “wealth amnesty” schemes. All options are tested.
Turkey’s trade deficit broke a fresh record with $11.3bn in August.
S&P Global Ratings downgraded Turkey’s sovereign credit rating by one notch to B/Stable, five notches below investment grade, from B+/Negative. More downgrades are on the way.
The finance ministry sold $2.5bn worth of sukuk papers at 9.758% coupon.
6 TURKEY Country Report October 2022 www.intellinews.com