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“Report”: The year 2019 won’t be easy for Turkey’s economy - ANALYSIS

“Report”: The year 2019 won’t be easy for Turkey’s economy - ANALYSIS

Baku. 22 January. REPORT.AZ/ USD rate has been at TRY 5-5.5 for three months. Though it signaled stabilization, Turkey’s problems it faced last year are not left behind.

Report’s analytical group believes that the year 2019 will not be easy for Turkey’s economy for a number reasons.

First reason is that the US Federal Reserve System is expected to continue its policy on rising interest rates at least twice this year. This will lead to a growth in USD rate in Turkey like in all countries and an increase in external debt in USD.

Moreover, the rise  in interest rates will cause investors’ interest in economy, securities market of developing countries, as well as Turkey. Money flow be will directed to the other side of the ocean. In order words, the investors will show interest to bonds in hard currency, rather than the debt financial instruments in TRY withthe  annual profitability of 15-20% won’t be interesting for them.

Another reason is that Turkey’s population is still shocked by dollar exchange. A partial stabilization of TRY rate is not tangible for the economy. Citizens and business structures are not interested in converting their money in foreign currency to TRY and invest in business. Less people take business loans from banks. This also creates a problem for local financial organizations. They pay interest for funds they involved but cannot sell them.

At the same time, Turkey is still unable to curb inflation. The Central Bank has been keeping an interest rate at 24% for several months, whereas the tight monetary policy hinders economic development anyway.

Fitch Rating Agency projects a 1.2% growth in Turkish economy this year, while earlier it had downgraded its forecast from 4.7% to 3.6% in June 2018. Fitch’s forecast for 2020 is 3.9%. 

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