Ahmet Davutoglu, Turkey's Prime Minister, said the government aims to narrow the trade... Read More
The nation’s fixed-income assets were upgraded to overweight from marketweight yesterday by Commerzbank AG, which cited Turkey’s improving current-account balance and inflation outlook. The deficit shrank to $2.6 billion in September, what would be the lowest since August 2013, according to the median estimate in a Bloomberg survey before the data is published in two days.
Turkey, a net energy importer, is benefiting from a 26 percent slump in crude prices since June as demand slows and output increases. With the economy expanding at the
slowest pace since 2012, consumer-loan growth decelerated to 10 percent in the year through October from 23 percent in the same period in 2013, central bank data show.
“I expect the improvement to continue,” Bora Tamer Yilmaz, an economist at Ziraat Yatirm, an Istanbul-based brokerage, said yesterday by phone. “The central bank is disciplined in terms of credit growth and falling commodity prices are a big advantage for Turkey.”
The country’s current-account shortfall narrowed 35 percent to $32.2 billion this year through September, according the median estimate of 13 economists surveyed by Bloomberg. The deficit will probably fall to $46 billion this year, or about 5.7 percent of gross domestic product, according to government estimates. That’s down from 8 percent in 2013 and almost 10 percent in 2011, when it was the world’s largest after the U.S. in absolute terms.
Brent’s Plunge
“The oil price is one of the leading ingredients for Turkey current account, due to its high energy dependency,” Ipek Ozkardeskaya, a currency strategist at Swissquote Bank SA in Geneva, said by e-mail yesterday. “The developing bear market in oil will be in Turkey’s favor as long as it lasts.”The lira weakened 0.4 percent to 2.2663 per dollar at 9:45am in Istanbul. It will strengthen less than 1 percent to 2.25 per dollar through the first quarter of next year, according to Swissquote. Brent crude fell 1.1 percent to $81.43 a barrel, the lowest since October, 2010.
Easing Needed
Yields on Turkey’s two-year government notes declined 84 basis points in the past three months to 8.52 percent yesterday, their lowest since July 25. That’s the biggest drop among major emerging markets tracked by Bloomberg and compares with a 98 basis-point increase for similar-maturity Brazilian debt in the same period.The central bank’s benchmark one-week repurchase rate has been at 8.25 percent since July after rising as high as 10 percent in January as the regulator took measures to halt the lira’s slide to a record.
“While it is true that fundamentals look better, we are already very close to the central bank funding rate in short-end bonds,” Kerem Baykal, a fund manager at Istanbul-based AK Portfoy, said yesterday by e-mail. “Whether the central bank can provide additional easing will depend on global risk appetite.”
Falling Imports
Turkey’s Regulation and Supervision Agency from January began capping maturities on credit-card, general-purpose and auto loans and set limits on the goods people can pay for through installments.That helped cut imports by 4.2 percent through September, while exports rose 5.5 percent, according to the statistics office in Ankara. The government aims to narrow the trade deficit so that exports are equivalent to 70 percent of the value of imports by 2018, from 65.9 percent so far this year, Turkish Prime Minister Ahmet Davutoglu said at a news conference in Ankara last week.
“We like Turkish credit on the shorter side,” Danat Abdrakhmanov, who oversees about $7.1 billion in emerging-market debt at Eaton Vance Corp., said in an interview in London on Nov. 10. “In zero to 4 years there is a lot of value in Turkish external debt. The oil price helps tremendously.”
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