By Rajeeb Pramanik 13-08-2020

Turkey: Doing It Again!

(3 min read)
Resize text:


Turkish policymakers have returned to the populist policies of yesteryear that pushed the country to the brink in 2018, when inflation surged to 25% and the currency tanked 40%. The ongoing deluge of monetary injections amid negative real rates will cause inflation to spike again, current account deficit to deteriorate further, and currency to fall to new lows:

• The Turkish central bank (CBRT) has slashed policy rates massively over the past year, from 24% to 8.25%. Since inflation is still in the double digits, the real interest rate has slid to a negative 2%, making borrowing very cheap. Moreover, CBRT is also providing copious amount of liquidity to the commercial banks. That, coupled with various newly introduced lending schemes and regulations, has incentivized banks to open the loan spigot. This is manifested in surging bank lending: lira-denominated loans are growing at a decade high rate of 45%, at a time when the pandemic has brought economic activity to a standstill (Chart 1).

TO READ THIS HIVE EXCLUSIVE
SUBSCRIBE TO MACRO HIVE PRIME

£39/month thereafter

For access to our Slack Chat Room, where we discuss all things markets with our researchers and subscribers

START YOUR FREE TRIAL


MOST READ

Successful Start-Ups Build Strong Founding Teams (4 min read)

By Sam van de Schootbrugge | Feb 10, 2021
Start-up success hinges on many factors, but most would agree that the skills and experience of the founder and initial founding...

Where Will the Economy Find 10 million Lost Jobs? (3 min read)

By John Tierney | Feb 08, 2021
The headline January labour market report was another downer – private payrolls rose a scant 6,000 versus the consensus...

Where Can you Get Higher Bond Yields?

By Caroline Grady | Dec 04, 2020
US yields are rising. The combination of growing optimism over a global recovery given vaccine progress, and the possibility of a US...

PREMIUM CONTENT

Which Countries Will Reach Covid-19 Herd Immunity in 2021? (3 min read)

By Sam van de Schootbrugge | Feb 19, 2021
Summary Vaccination rollouts are accelerating, and global…

Higher US Yields Are Good for Equities (1 min read)

By Bilal Hafeez | Feb 16, 2021
Many say that higher US bond yields…

Tesla Bitcoin Bombshell: The Trickle May Turn to a Flood (4 min read)

By John Butler | Feb 12, 2021
Summary US corporate cash piles continue to…

Want To Join Our Community Of Leading Investors And Researchers In Our Slack Chat Room?