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| The Grand Turk | |
| Spengler: Turkey’s economic crisis has just begun | |
| 2018-06-21 | |
The Turkish central bank managed to halt the free-fall of the country’s currency last week with a sharp rise in interest rates. But the move failed to stop the free-fall of Turkey’s equity market and – far more dangerous – the collapse of the credit quality of Turkey’s banks. Only last October, the euro-denominated 10-year bond of Turkey’s largest private lender, Garanti Bank, yielded just 3%. Now it yields more than 7%, and the dollar value of the bond has fallen from over 120 euros to around 80 euros. Turkey’s Istanbul 30 stock market index meanwhile has fallen by 35% in US dollar terms since August 29, 2017. Its most vulnerable lender, Halk Bank, lost 63% of its US dollar value in the same period and now trades at 40% of book value. Turkey’s banks are shut out of world capital markets, and the country is hard put to raise the US$50 billion in new hard currency it needs to finance a current account deficit running at around 6% of GDP. Turkish businesses have about US$300 billion in foreign currency debt, and the cost of servicing it has nearly doubled in local-currency terms due to the lira’s depreciation since 2015. The banks will have trouble rolling over their existing short-term borrowings in hard currency, and trouble collecting loan payments from customers crushed by the collapse of the lira. Like the dead parrot in the Monty Python sketch, Turkey’s major banks have flipped the mortal coil and joined the choir celestial, but the Turkish central bank is there to maintain the illusion of life. The trouble is that the central bank’s resources are running thin: Foreign exchange reserves as of June 1 stood at just US$82 billion, or four months’ worth of imports, vs. nearly US$120 billion at the end of 2014. | |
| Posted by:3dc |
| #7 The US ought to be quietly working the bankers to push this collapse farther faster and deeper, to trigger an uprising against Erdogan and the Islamists. |
| Posted by: Squinty Elmuse7861 2018-06-21 23:22 |
| #6 What's the value of the bond in lira? Is it below par or is this a stretch? I vigorously dislike Erdogan and will not holiday in Turkey anymore, but this article is weak sauce. |
| Posted by: Bright Pebbles 2018-06-21 15:14 |
| #5 the dollar value of the bond has fallen from over 120 euros to around 80 euros. Ah, what? Maybe with an additional exchange. |
| Posted by: Threarong Grereling4499 2018-06-21 14:50 |
| #4 > sharp rise in interest rates. But the move failed to stop the free-fall of Turkey’s equity market Er share prices go down as gilts rise. |
| Posted by: Bright Pebbles 2018-06-21 14:31 |
| #3 Is this the Muslim version of Get Woke, Go Broke? |
| Posted by: regular joe 2018-06-21 13:59 |
| #2 Good time to pick a losing fight, Yippy: Turkey strikes back, imposes tariffs on $1.8B worth of US goods |
| Posted by: Frank G 2018-06-21 12:34 |
| #1 Turkey’s banks are shut out of world capital markets It’s not clear to me why this is so, but they certainly aren’t a risk I’d be comfortable with. |
| Posted by: trailing wife 2018-06-21 08:28 |