What matters on Tuesday, June 21

An additional budget has been submitted to the Parliament in a month when the budget posted a record-high surplus. Accordingly, an extraordinary appropriation of TRY 880.47bn has been added to the expenditures item of the budget. The wage hike for civil servants, wage hike oriented social security premium expenditures, citizens’ social security premium payments, and transfers to BOTAS Petroleum Pipeline Corporation to counter the effect of the surge in electricity and natural gas prices on citizens has been used as justification of the legislative proposal on an additional budget. Thus, most of the amount has been allocated for staff expenses as the item of staff expenses and personal social security expenses have been raised by 40.5%. The Presidential salary has also been increased by 20.2%. With the revenue hike, the year-end budget deficit is expected to decrease from TRY 278.4bn to TRY 78.3bn for 2022.

Insurance companies in Turkey are facing one of their most challenging operating environments of the past decade with earnings and capital adequacy likely to come under severe strain in 2022-2023, according to the international credit rating agency Fitch Ratings. The institution stated in a new report that the effects of macroeconomic deterioration, soaring inflation, and the continuing price cap on motor third-party liability (MTPL) insurance could push some insurers below minimum regulatory solvency levels, forcing them to raise capital or to be acquired by stronger competitors. Fitch estimates inflation, which exceeded 70% in May, to stand at 60% at the end of 2022 and 55% at the end of 2023. “Sustained inflation at such high levels will have significant negative implications for insurers, pushing up the cost of claims and potentially leading to reserve shortfalls on longer-tail business lines,” the report read.

Turkey’s benchmark stock index closed yesterday at 2,539.20 points, up 0.23% from Friday’s close. Starting the week at 2,539.20 points, Borsa Istanbul’s BIST 100 index earned 5.87 points from the previous close. The total market value of the BIST 100 was around TRY 2.07tr by market close, with a daily trading volume of TRY 38.6bn. Global stock exchanges have made an unsteady start to the week due to concerns of a recession, according to analysts. They stated that 2,500 points will be the support level and 2,560 points will be the resistance level for the BIST 100 index, in technical terms.

On the foreign policy side, talks on Finland and Sweden’s NATO membership bids will continue, and the forthcoming summit in Madrid is not an endpoint, according to presidential spokesman Ibrahim Kalin. “As we have said before, the NATO summit in Madrid is not an endpoint for us, so these negotiations will continue. That’s what we told our interlocutors from Finland and Sweden,” Kalin told in a news conference in Brussels following NATO-hosted talks with Finland and Sweden. He said Turkey expects Sweden to take concrete steps against the PKK terror group, acknowledging statements by Swedish authorities in this regard. The spokesman also voiced Ankara’s expectations regarding the lifting of a direct or indirect arms embargo imposed on Turkey.


No important data will be released in the country.

The Parliament will continue to discuss the legislative proposal on the law for the Istanbul Finance Center (3.00 p.m.).


>> FDI outflows on the rise

Foreign direct investment (FDI) inflows to Turkey are slowing, while FDI outflows from Turkey continue to surge. The ratio of FDI outflows to FDI inflows, which was 41.4% in 2020 and 46.5% in 2021, rose to 60.3% in January-April. The annualized data reached 49%.

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