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.
'Panga'
Directed by Ashwiny Iyer Tiwari
Starring Kangana Ranaut, Richa Chadha, Jassie Gill, Yagya Bhasin, Neena Gupta
Rating: 3.5/5
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
Tax authority targets shisha levy evasion
The Federal Tax Authority will track shisha imports with electronic markers to protect customers and ensure levies have been paid.
Khalid Ali Al Bustani, director of the tax authority, on Sunday said the move is to "prevent tax evasion and support the authority’s tax collection efforts".
The scheme’s first phase, which came into effect on 1st January, 2019, covers all types of imported and domestically produced and distributed cigarettes. As of May 1, importing any type of cigarettes without the digital marks will be prohibited.
He said the latest phase will see imported and locally produced shisha tobacco tracked by the final quarter of this year.
"The FTA also maintains ongoing communication with concerned companies, to help them adapt their systems to meet our requirements and coordinate between all parties involved," he said.
As with cigarettes, shisha was hit with a 100 per cent tax in October 2017, though manufacturers and cafes absorbed some of the costs to prevent prices doubling.
Infiniti QX80 specs
Engine: twin-turbocharged 3.5-liter V6
Power: 450hp
Torque: 700Nm
Price: From Dh450,000, Autograph model from Dh510,000
Available: Now
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Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
F1 The Movie
Starring: Brad Pitt, Damson Idris, Kerry Condon, Javier Bardem
Director: Joseph Kosinski
Rating: 4/5
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
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The design
The protective shell is covered in solar panels to make use of light and produce energy. This will drastically reduce energy loss.
More than 80 per cent of the energy consumed by the French pavilion will be produced by the sun.
The architecture will control light sources to provide a highly insulated and airtight building.
The forecourt is protected from the sun and the plants will refresh the inner spaces.
A micro water treatment plant will recycle used water to supply the irrigation for the plants and to flush the toilets. This will reduce the pavilion’s need for fresh water by 30 per cent.
Energy-saving equipment will be used for all lighting and projections.
Beyond its use for the expo, the pavilion will be easy to dismantle and reuse the material.
Some elements of the metal frame can be prefabricated in a factory.
From architects to sound technicians and construction companies, a group of experts from 10 companies have created the pavilion.
Work will begin in May; the first stone will be laid in Dubai in the second quarter of 2019.
Construction of the pavilion will take 17 months from May 2019 to September 2020.
CHELSEA SQUAD
Arrizabalaga, Bettinelli, Rudiger, Christensen, Silva, Chalobah, Sarr, Azpilicueta, James, Kenedy, Alonso, Jorginho, Kante, Kovacic, Saul, Barkley, Ziyech, Pulisic, Mount, Hudson-Odoi, Werner, Havertz, Lukaku.
The%20specs
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MATCH INFO
Fixture: Thailand v UAE, Tuesday, 4pm (UAE)
TV: Abu Dhabi Sports
UAE currency: the story behind the money in your pockets
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Walls
Louis Tomlinson
3 out of 5 stars
(Syco Music/Arista Records)
West Asia Premiership
Dubai Hurricanes 58-10 Dubai Knights Eagles
Dubai Tigers 5-39 Bahrain
Jebel Ali Dragons 16-56 Abu Dhabi Harlequins
The biog
Born: High Wycombe, England
Favourite vehicle: One with solid axels
Favourite camping spot: Anywhere I can get to.
Favourite road trip: My first trip to Kazakhstan-Kyrgyzstan. The desert they have over there is different and the language made it a bit more challenging.
Favourite spot in the UAE: Al Dhafra. It’s unique, natural, inaccessible, unspoilt.
Fixtures
50-over match
UAE v Lancashire, starts at 10am
Champion County match
MCC v Surrey, four-day match, starting on Sunday, March 24, play starts at 10am
Both matches are at ICC Academy, Dubai Sports City. Admission is free.
