Hakan Aran, General Manager of İsbank, Turkey’s biggest private bank, said that he thinks that foreign capital waiting to enter Turkey will come before, not after, the local elections. Aran believes that the rationalization of interest rates and the predictability of the exchange rate will be effective in this.
Hakan Aran answered journalists’ questions during the 13th International Resort Tourism Congress organized by the Mediterranean Touristic Hoteliers and Operators Association (AKTOB) in Antalya with the main sponsorship of Türkiye İş Bankası.
“There is generally an expectation that foreign capital’s interest in Turkey will increase after the elections. I think that the foreign capital that has been waiting to enter Turkey will come before the elections, not after the local elections. With the rationalization of interest rates in Turkey, foreign capital can now predict the exchange rate, which will clarify when it will exchange its foreign currency and enter Turkey, which instruments it will invest in Turkey and which businesses it will invest money in here” said Aran.
Aran foresees that capital flows to Turkey will strengthen and we will be in a position to provide foreign currency loans at affordable costs, and that the CDS risk premium will fall below 300. “Therefore, I think that in a place where the CDS risk premium is low, foreign interest is high, and we can find foreign currency loans, we will be able to provide loans in dollars and euros to the business world and tourism sector very easily. This will also increase competition among banks” Aran said. According to Aran the rise in TRY interest rates is a healthy development, not a negative one and the conjuncture points to a relaxation.
Stating that the last interest rate hike was in line with their expectations, Aran said, “We think that this is the right step and that there will be a 250 basis point increase next month. When the 40 percent interest rate is 42.5 percent next month, it will move to a real interest rate above the highest expected inflation. We think this is very important in terms of controlling inflation and anchoring expectations in the 36-42 percent range.”
Interest rates in the 50-55 percent range should be enough
Commenting on his interest rate expectations for the upcoming period, Aran said that he foresees a pause in interest rate hikes after the increase in December. Stating that he expects a significant change in the composition of deposits after the Central Bank’s interest rate hikes, Aran said, “We were dollarized and the share of foreign currency deposits had increased a lot. In the normalized policy, we expect a significant return from foreign currency deposits to TRY deposits.” Underlining that the interest rate to be given to savings deposits has to be in line with what is predicted in the inflation of the next 3 months with the development of inflation, Aran said, “This system does not work as long as you cannot convince the customer. With the course I see today, the interest rates in the 50-55 percent band should be sufficient for a 90-day period with the 2024 forecast curve drawn by the Central Bank.”