Rising inflation and heterodox policies increase macroeconomic and financial risks in Turkey, according to the international credit rating agency Fitch Ratings. “High inflation and fiscal policies, which are implemented against TRY’ devaluation make the public finance more sensitive to foreign exchange (FX) fluctuations and increase macroeconomic vulnerability,” the institution said, stressing that Turkey’s borrowing costs rapidly surge despite low public debt compared to its counterparts. Fitch Rating also pointed out that the fiscal measures to restrict the adverse impact of inflation and TRY’s devaluation may create pressure on public finance, which is the strong side of the country. The economic measures taken by the government don’t create a solution for the sharp decline in domestic confidence, according to Fitch Ratings. The agency also said negative real interest rates and uncertainties about the economic policies to be pursued before the 2023 elections paved the way for TRY’s devaluation.
The legislative proposal on the Tax Procedure Law and amendment of the Corporate Law has been approved by the Parliament. As part of supporting the financial stability by increasing the share of TRY in the total deposit accounts and participation funds in the banking system, interest rates and profit shares of corporate taxpayers that convert their FX and gold into TRY deposit and participation accounts will be exempted from tax. The exemption also includes FX rate earnings during the conversion.
Borsa Istanbul’s net profit jumped 44% to TRY 2.04bn at the end of 2021, and the stock exchange broke a record with 52 initial public offerings (IPO) last year, according to Korkmaz Ergun, CEO of Borsa Istanbul. The IPO size of 52 companies totaled TRY 21.6bn. “The IPO size of eight companies amounted to TRY 1.1bn in 2020. The previous record was broken in 1990 with 35 firms,” Ergun said. The Borsa Istanbul CEO also noted that the number of citizens with equities rose from 1.2 million in 2020 to 2.4 million in 2021. The average daily transaction volume of the Equity Market rose from TRY 26.2bn to TRY 30.2bn in 2021, compared to the previous year, he added. The VIOP market also attracted interest in this period.
The Central Bank will release Residential Property Price Index for November (2.30 pm).
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The daily DUNYA Editorial Coordinator and Columnist Talip Aktas estimates the cost to be undertaken by the Treasury due to its FX rate guarantee for FX-protected TRY deposit accounts in case FX rates will increase again.