Ratings agency Fitch warned in a new report last week that Turkey’s recent economic policy is raising risks to public finances and the state’s position in the foreign exchange (FX) market.
“Increasingly interventionist and unpredictable policies could further undermine domestic confidence and access to external financing, as authorities continue to focus on maintaining high growth despite a challenging external environment and growing macroeconomic imbalances,” it said. exhibition.
A plan introduced as a safety net in December 2021 to boost confidence in the Turkish lira and avoid a reversal of 500 basis points of interest rate cuts in September-December did not reduce macroeconomic and financial stability risks either, it said. Fitch on the emergency “brake” that was activated when the Turkish lira hit 18 against the dollar before last Christmas.
The report was published as Turkey’s CDS touched 900 basis points on July 14, essentially back to levels seen during the 2001 financial crisis.
Inflation in Turkey soared to a 24-year high of 78.62% in June amid continued decline of the pound. The economic fallout from Russia’s invasion of Ukraine has also revived prices in import-dependent Turkey, especially due to rising energy and commodity costs.
About ten days ago Fitch downgraded Turkey’s debt rating to “B” from “B+”, citing rising inflation and broad concerns about the economy, from a widening current account deficit to interventionist policies.
Petros Kranias
Source: Capital
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