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S&P Warns of Dollarisation Risks, Further TRY Volatility

TURKEY
  • Turkey's economic outlook is being clouded by the prospect of dollarisation, unpredictable policies and currency volatility, which makes it difficult to attract investment to the country
  • Investors are deterred by lack of monetary policy credibility, exacerbated by a decision to cut interest rates when inflation was four times the central bank's 5% target
  • "Although the first immediate effect we observed is in the exchange rates, the risk that appears to be going forward is towards increased dollarisation and further constraining the functioning of monetary policy," Rybnikov said.
  • While a weaker lira makes Turkey's exports more competitive, it is important to consider the impact on sectors, including manufacturing, where a weaker lira drives up prices due to reliance on imported goods and materials, he said.
  • S&P Director Rybnikov said people should not only focus on the export side of the equation but on the constantly depreciating lira and subsequent high inflation, which has been observed since 2017.
MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
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MNI London Bureau | +44 020-3983-7894 | murray.nichol@marketnews.com
BulletEM BulletEmerging Market NewsHomepage

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