Fitch Ratings cut Turkey’s sovereign debt rating deeper into junk territory citing the country's “spiralling inflation”, government and central bank policies that have increased macro and external risks as well as higher financing needs and limited capital inflows.
The agency slashed Turkey's rating to B from B+, five levels below investment grade, which indicates that material default risk is present, but a limited margin of safety remains, according to Fitch. Such a rating makes it more difficult to access capital markets and raise financing. The outlook for Turkey is negative, Fitch said.
The rating decision comes after inflation in the country hit a 24-year high of 78.62 per cent in June, according to data from the Turkish Statistical Institute.
Surging energy and commodity prices as well as continued depreciation of Turkey's currency has contributed to rising costs with producer prices rising 138 per cent annually in the month of June, while food prices soared 93.93 per cent.
The lira lost 44 per cent of its value against the dollar last year and more than 20 per cent of its value against the greenback this year, while Turkey’s inflation has risen more than 42 per cent since December.
Fitch said it forecasts Turkey's annual inflation to average 71.4 per cent in 2022, which is the highest of any country rated by the agency.
"Its trajectory remains highly uncertain due to increased risks of backward indexation, rising expectations and additional lira depreciation, as the exchange rate pass-through has increased in both speed and magnitude," Fitch said.
Inflation is projected to slow to an average 57 per cent in 2023, according to Fitch due to accommodative policies that are expected until the 2023 elections.
“Despite rising inflation, we do not expect the Central Bank of the Republic of Turkey to hike interest rates given the political constraints and President [Recep Tayyip] Erdogan’s call for lower interest rates,” Abu Dhabi Commercial Bank economists Monica Malik and Thirumalai Nagesh said in a research note last week.
Over much of the past five years, Turkey has remained focused on boosting economic growth and the country’s exports.
Mr Erdogan’s government has argued that high interest rates cause inflation rather than curb it, and has piled pressure on the central bank to keep borrowing costs low in the face of risks to the currency and prices.
The central bank kept rates unchanged at its June 23 meeting after ending last year with 500 basis points of cumulative easing. It has kept its key borrowing rate at 14 per cent over the past six meetings as it pursues policies aimed at widening the use of the local currency and making available long-term investment loans.
The central bank has been guided by "political considerations" and "the government's focus on maintaining high growth feeds foreign exchange demand, depreciation pressures on the lira, decline in international reserves and spiralling inflation, and discourages capital inflows to fund the higher current account deficit", Fitch said.
Fitch estimates that the higher energy prices and weaker external demand will result in a current account deficit of 5.1 per cent of gross domestic product in 2022 even with the recovery of the country's tourism industry. Tourism arrivals in the country surged 308 per cent year-on-year in May.
"Although net errors and omissions have supported the balance of payments in recent years, the limited visibility of their nature and resilience maintains the risk of additional pressure on international reserves ahead," the rating agency said.
The country has about $182 billion in external debt maturing over the next 12 months to the end of April 2023 and while access to external financing for the sovereign and private sector has been resilient it remains vulnerable to changes in investor sentiment, especially given tighter global financing conditions and Turkey's increased funding costs, Fitch said.
While Turkey's issuance of $5bn earlier this year and its existing foreign-currency cash buffers reduce near-term financing risks, its international reserves remain under pressure, Fitch said.
Fitch estimates Turkey's international reserves have declined to $101bn and that the central bank's net foreign exchange asset position turned "slightly negative" in June, falling to -$64bn when excluding FX swaps, similar to December 2021 levels.
The rating agency forecasts the country's international reserves will decline to $94bn by the end of 2022 and to $88 billion in 2023.
Mohammed bin Zayed Majlis
Killing of Qassem Suleimani
Killing of Qassem Suleimani
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RESULTS
5pm: Maiden | Dh80,000 | 1,600m
Winner: AF Al Moreeb, Tadhg O’Shea (jockey), Ernst Oertel (trainer)
5.30pm: Handicap | Dh80,000 | 1,600m
Winner: AF Makerah, Adrie de Vries, Ernst Oertel
6pm: Handicap | Dh80,000 | 2,200m
Winner: Hazeme, Richard Mullen, Jean de Roualle
6.30pm: Handicap | Dh85,000 | 2,200m
Winner: AF Yatroq, Brett Doyle, Ernst Oertel
7pm: Shadwell Farm for Private Owners Handicap | Dh70,000 | 2,200m
Winner: Nawwaf KB, Patrick Cosgrave, Helal Al Alawi
7.30pm: Handicap (TB) | Dh100,000 | 1,600m
Winner: Treasured Times, Bernardo Pinheiro, Rashed Bouresly
RIDE%20ON
%3Cp%3EDirector%3A%20Larry%20Yang%3C%2Fp%3E%0A%3Cp%3EStars%3A%20Jackie%20Chan%2C%20Liu%20Haocun%2C%20Kevin%20Guo%3C%2Fp%3E%0A%3Cp%3ERating%3A%202%2F5%3C%2Fp%3E%0A
Jetour T1 specs
Engine: 2-litre turbocharged
Power: 254hp
Torque: 390Nm
Price: From Dh126,000
Available: Now
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The specs
Engine: 4.0-litre V8 twin-turbocharged and three electric motors
Power: Combined output 920hp
Torque: 730Nm at 4,000-7,000rpm
Transmission: 8-speed dual-clutch automatic
Fuel consumption: 11.2L/100km
On sale: Now, deliveries expected later in 2025
Price: expected to start at Dh1,432,000
Mohammed bin Zayed Majlis
COMPANY PROFILE
Name: Xpanceo
Started: 2018
Founders: Roman Axelrod, Valentyn Volkov
Based: Dubai, UAE
Industry: Smart contact lenses, augmented/virtual reality
Funding: $40 million
Investor: Opportunity Venture (Asia)
match info
Maratha Arabians 138-2
C Lynn 91*, A Lyth 20, B Laughlin 1-15
Team Abu Dhabi 114-3
L Wright 40*, L Malinga 0-13, M McClenaghan 1-17
Maratha Arabians won by 24 runs
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Another way to earn air miles
In addition to the Emirates and Etihad programmes, there is the Air Miles Middle East card, which offers members the ability to choose any airline, has no black-out dates and no restrictions on seat availability. Air Miles is linked up to HSBC credit cards and can also be earned through retail partners such as Spinneys, Sharaf DG and The Toy Store.
An Emirates Dubai-London round-trip ticket costs 180,000 miles on the Air Miles website. But customers earn these ‘miles’ at a much faster rate than airline miles. Adidas offers two air miles per Dh1 spent. Air Miles has partnerships with websites as well, so booking.com and agoda.com offer three miles per Dh1 spent.
“If you use your HSBC credit card when shopping at our partners, you are able to earn Air Miles twice which will mean you can get that flight reward faster and for less spend,” says Paul Lacey, the managing director for Europe, Middle East and India for Aimia, which owns and operates Air Miles Middle East.
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
The years Ramadan fell in May
Killing of Qassem Suleimani
5 of the most-popular Airbnb locations in Dubai
Bobby Grudziecki, chief operating officer of Frank Porter, identifies the five most popular areas in Dubai for those looking to make the most out of their properties and the rates owners can secure:
• Dubai Marina
The Marina and Jumeirah Beach Residence are popular locations, says Mr Grudziecki, due to their closeness to the beach, restaurants and hotels.
Frank Porter’s average Airbnb rent:
One bedroom: Dh482 to Dh739
Two bedroom: Dh627 to Dh960
Three bedroom: Dh721 to Dh1,104
• Downtown
Within walking distance of the Dubai Mall, Burj Khalifa and the famous fountains, this location combines business and leisure. “Sure it’s for tourists,” says Mr Grudziecki. “Though Downtown [still caters to business people] because it’s close to Dubai International Financial Centre."
Frank Porter’s average Airbnb rent:
One bedroom: Dh497 to Dh772
Two bedroom: Dh646 to Dh1,003
Three bedroom: Dh743 to Dh1,154
• City Walk
The rising star of the Dubai property market, this area is lined with pristine sidewalks, boutiques and cafes and close to the new entertainment venue Coca Cola Arena. “Downtown and Marina are pretty much the same prices,” Mr Grudziecki says, “but City Walk is higher.”
Frank Porter’s average Airbnb rent:
One bedroom: Dh524 to Dh809
Two bedroom: Dh682 to Dh1,052
Three bedroom: Dh784 to Dh1,210
• Jumeirah Lake Towers
Dubai Marina’s little brother JLT resides on the other side of Sheikh Zayed road but is still close enough to beachside outlets and attractions. The big selling point for Airbnb renters, however, is that “it’s cheaper than Dubai Marina”, Mr Grudziecki says.
Frank Porter’s average Airbnb rent:
One bedroom: Dh422 to Dh629
Two bedroom: Dh549 to Dh818
Three bedroom: Dh631 to Dh941
• Palm Jumeirah
Palm Jumeirah's proximity to luxury resorts is attractive, especially for big families, says Mr Grudziecki, as Airbnb renters can secure competitive rates on one of the world’s most famous tourist destinations.
Frank Porter’s average Airbnb rent:
One bedroom: Dh503 to Dh770
Two bedroom: Dh654 to Dh1,002
Three bedroom: Dh752 to Dh1,152
Inside%20Out%202
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