The likelihood of an agreement between Turkey and the IMF on a new stand-by program has recently increased following PM Erdogan’s visit in Washington. The Fund’s President Strauss-Kahn and PM Erdogan highlighted there were still disagreements over technical issues such as the size of the package or on the fiscal policy to conduct but the stance of PM Erdogan towards the IMF has considerably softened in the last days. There seems to be a conflicting view over the economic outlook among the Government and business circles, hence precautionary measures.
In fact, rating agency Standard & Poor’s recently revised down Turkey’s outlook from “stable” to “negative” because current external financing conditions could put at risk Turkey’s private sector external debt roll-overs which in turn may put pressure on the TRY stability.
On the economy front, the situation is worsening with the industrial production index falling by 5.5% YoY in September which is the sharpest fall since the 2001 crisis while the capacity utilization rate declined to 76.7%.
In the meantime, markets are still declining with the ISE-100 index contracting by 14% in the last two weeks (- 56.8% YTD) and the TRY losing 5.4% against the USD to 1.6335. However, yields on the benchmark declined by 47bps to 22.27%.
The Turkish newsletter (127 ko)