The Turkish Industrialists and Businessmen’s Association (TUSIAD) verified that it received a letter from U.S. Deputy Treasury Secretary Wally Adeyem warning of possible sanctions risks if Turkish companies establish relations with sanctioned Russian entities and individuals. While the letter has disquieted the business world, Turkish businesspeople hope these sanction risks do not turn into action. Sector representatives called for their members to be deliberate. Turkey’s exports to the U.S. have tripled over the past decade.
The U.S. promised to expand its visa processing capacity in Turkey, according to Reuters. Foreign Minister Mevlut Cavusoglu previously accused the U.S. and some European nations of intentionally drawing out their visa application processes, calling it an effort to embarrass President Recep Tayyip Erdogan’s ruling AK Party ahead of elections in Turkey next year. The U.S. State Department indicated that Washington did not want the issue to escalate. U.S. visa applicants in Turkey have been facing enormous delays, with wait times for an appointment extending up to 15 months.
The adverse impact of the decline in EUR/USD parity on overall Turkish exports has reached USD 7bn as of July, according to Turkish Exporters Assembly (TIM) President Mustafa Gultepe. The EUR/USD which hovered around 1.15 in 2021, has recently fallen below 1.00.
The Central Bank’s recent policy rate cut may deteriorate Turkey’s inflation outlook and create downward pressure on the TRY, according to Klaus Baader, Global Chief Economist at the France-based banking group Societe Generale. Stressing that many central banks such as the Federal Reserve and European Central Bank will continue to increase the interest rate, Baader noted: “Inflation can be reduced through growth. However, growth should only exist on the supply side of the economy. Inflation has always been a sign of a demand that exceeds the supply. The growth must be ensured only on the supply side, but it’s hard to do it.” Baader also stated that the decision on bilateral trade between Turkey and Russia in RUB won’t have a significant impact on the Turkish economy.
Turkish contractors ‘do great runs’ in the international arena, and the annual revenue target has been increased to USD 75bn, according to President Recep Tayyip Erdogan. Speaking at an award ceremony, President Erdogan said the source of the bank loan issue is based on a temporary approach difference between the finance sector and the real sector. “I believe that this will turn into a comprehensive compromise that will support production and employment-oriented growth,” Erdogan added.
The capacity utilization rate dropped by 1.5 points to 76.7% in August, compared to the previous month, according to the Central Bank.
The Real Sector Confidence Index declined by 1.6 points to 102.1 points in August, month-over-month, according to the Central Bank.
The seasonally-adjusted confidence index dropped by 1.3% in the services sector and 0.4% in the retail trade sector while it surged by 1.5% in the construction sector in August, compared to the previous month, according to the Turkish Statistical Institute (TurkStat).
The Central Bank will release weekly monetary and banking statistics (2.30 p.m.).
>> The Financial Services Confidence Index (FSCI) dropped by 3.5 points to 168.3 points in August, compared to the previous month, according to the Central Bank.
>> Istanbul welcomed 8.5 million foreign visitors in the first seven months of the year, according to the Istanbul Directorate of Culture and Tourism. The number of foreign tourists who visited Istanbul surged by 56% from 1.1 million to 1.7 million in July, compared to the same month last year.
>> The restructured debt of companies has totaled TRY 107.1bn since October 2019, when the Framework Agreements on Financial Restructuring (FYYCA) entered into force, according to the Banks Association of Turkey (TBB). As part of the FYYCA, seven large-scaled companies signed a debt restructuring agreement worth TRY 555m in July.
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Our Foreign Policy Columnist Zeynep Gurcanli analyses the AK Party government’s recent foreign policy.