Moody's Investors Service has upgraded Turkey's sovereign credit rating, the first such rating action in more than a decade, citing improvements in governance and economic policies.
The country's sovereign credit rating was raised to “B1" from “B3", with a positive outlook, New York-based Moody's said on Friday.
A “B1” rating, which is “highly speculative”, is four levels below investment grade, according to the ratings scale of Moody's. Non-investment grade makes it more difficult for a country to get access to capital markets and raise funding when it wants to borrow.
This matches S&P Global Ratings' action in May, in which it upgraded Turkey to “B+".
Moody's' decision was driven by improvements in Ankara's policies, “more specifically the decisive and increasingly well-established return to orthodox monetary policy”.
“This is yielding first visible results in terms of reducing Turkey's major macroeconomic imbalances … the positive outlook reflects a balance of risks skewed to the upside,” it said.
“As the credibility and effectiveness of monetary policy rises, macroeconomic stability and strengthened institutions may allow Turkey's underlying credit strengths … reduce the risk of long-lasting inflation shocks in the future.”
Turkey is facing economic challenges, underpinned by chronic inflation. President Recep Tayyip Erdogan installed an economic team to stabilise the economy and control consumer prices last year.
Inflation in the country hit 69.8 per cent in April, above initial projections, the Central Bank of Turkey said in its latest inflation report released in May.
The regulator is more optimistic in the longer term, expecting inflation to go down to 38 per cent by the end of 2024 and further to 14 per cent at the end of 2025, it said.
That silver lining is in line with government data released in May that showed Turkey's economy expanded by 5.7 per cent in the first quarter of 2024, as domestic demand strengthened.
“Inflation and domestic demand have started to moderate, giving us greater confidence that inflationary pressures will ease significantly over the coming months and into 2025,” Moody's said.
The Turkish lira, however, remains one of the worst performers among emerging market currencies tracked by Bloomberg. It is down about 10 per cent so far in 2024.
However, the central bank's move of “rapidly enhancing” the credibility of its monetary policy is helping to restore confidence in the currency, Moody's said.
“Moreover, the tight policy stance is already materially reducing Turkey's elevated external vulnerability.”
Another positive development for Turkey is its removal from the Financial Action Task Force “grey list” of countries that face tighter monitoring for money laundering and terrorism financing last month, as the country has made “significant progress” in its fight against illicit actions in the sector.
The decision is expected to boost investor confidence in Turkey's economy and would have “extremely positive consequences” for its financial sector, Turkey's Vice President Cevdet Yilmaz said on X after the FATF's move.
Moody's cautioned, however, that external vulnerability risks remain “significant” for Turkey. Also, while political risks have declined, they remain a key rating constraint, it said.
It noted that with the next parliamentary and presidential elections in 2028, this gives Ankara time to bring inflation down to previous low levels, “even at the cost of temporarily low economic growth”.
“However, a very sharp slowdown in growth coupled with rapidly rising unemployment could lead to political pressure for an early easing of the monetary policy stance,” Moody's said.
“We expect that the authorities will maintain the tight economic policy stance for some time, so as to ensure that inflation expectations converge to the central bank's target on a sustained basis.”
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How will Gen Alpha invest?
Mark Chahwan, co-founder and chief executive of robo-advisory firm Sarwa, forecasts that Generation Alpha (born between 2010 and 2024) will start investing in their teenage years and therefore benefit from compound interest.
“Technology and education should be the main drivers to make this happen, whether it’s investing in a few clicks or their schools/parents stepping up their personal finance education skills,” he adds.
Mr Chahwan says younger generations have a higher capacity to take on risk, but for some their appetite can be more cautious because they are investing for the first time. “Schools still do not teach personal finance and stock market investing, so a lot of the learning journey can feel daunting and intimidating,” he says.
He advises millennials to not always start with an aggressive portfolio even if they can afford to take risks. “We always advise to work your way up to your risk capacity, that way you experience volatility and get used to it. Given the higher risk capacity for the younger generations, stocks are a favourite,” says Mr Chahwan.
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Second ODI
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England win by 86 runs
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All kick-off times 10.45pm UAE ( 4 GMT) unless stated
Tuesday
Sevilla v Maribor
Spartak Moscow v Liverpool
Manchester City v Shakhtar Donetsk
Napoli v Feyenoord
Besiktas v RB Leipzig
Monaco v Porto
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Tonight's Chat on The National
Tonight's Chat is a series of online conversations on The National. The series features a diverse range of celebrities, politicians and business leaders from around the Arab world.
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Ruwais timeline
1971 Abu Dhabi National Oil Company established
1980 Ruwais Housing Complex built, located 10 kilometres away from industrial plants
1982 120,000 bpd capacity Ruwais refinery complex officially inaugurated by the founder of the UAE Sheikh Zayed
1984 Second phase of Ruwais Housing Complex built. Today the 7,000-unit complex houses some 24,000 people.
1985 The refinery is expanded with the commissioning of a 27,000 b/d hydro cracker complex
2009 Plans announced to build $1.2 billion fertilizer plant in Ruwais, producing urea
2010 Adnoc awards $10bn contracts for expansion of Ruwais refinery, to double capacity from 415,000 bpd
2014 Ruwais 261-outlet shopping mall opens
2014 Production starts at newly expanded Ruwais refinery, providing jet fuel and diesel and allowing the UAE to be self-sufficient for petrol supplies
2014 Etihad Rail begins transportation of sulphur from Shah and Habshan to Ruwais for export
2017 Aldar Academies to operate Adnoc’s schools including in Ruwais from September. Eight schools operate in total within the housing complex.
2018 Adnoc announces plans to invest $3.1 billion on upgrading its Ruwais refinery
2018 NMC Healthcare selected to manage operations of Ruwais Hospital
2018 Adnoc announces new downstream strategy at event in Abu Dhabi on May 13
Source: The National
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
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From: Lonely Loris is a Sunda slow loris, one of nine species of the animal native to Indonesia, Malaysia, Thailand and Singapore
Status: Critically endangered, and listed as vulnerable on the International Union for Conservation of Nature red list due to growing demand in the global exotic pet trade. It is one of the most popular primate species found at Indonesian pet markets
Likes: Sleeping, which they do for up to 18 hours a day. When they are awake, they like to eat fruit, insects, small birds and reptiles and some types of vegetation
Dislikes: Sunlight. Being a nocturnal animal, the slow loris wakes around sunset and is active throughout the night
Superpowers: His dangerous elbows. The slow loris’s doe eyes may make it look cute, but it is also deadly. The only known venomous primate, it hisses and clasps its paws and can produce a venom from its elbow that can cause anaphylactic shock and even death in humans
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Sheikh Dhiyab bin Isa (ruled 1761-1793) Built Qasr Al Hosn as a watchtower to guard over the only freshwater well on Abu Dhabi island.
Sheikh Shakhbut bin Dhiyab (ruled 1793-1816) Expanded the tower into a small fort and transferred his ruling place of residence from Liwa Oasis to the fort on the island.
Sheikh Tahnoon bin Shakhbut (ruled 1818-1833) Expanded Qasr Al Hosn further as Abu Dhabi grew from a small village of palm huts to a town of more than 5,000 inhabitants.
Sheikh Khalifa bin Shakhbut (ruled 1833-1845) Repaired and fortified the fort.
Sheikh Saeed bin Tahnoon (ruled 1845-1855) Turned Qasr Al Hosn into a strong two-storied structure.
Sheikh Zayed bin Khalifa (ruled 1855-1909) Expanded Qasr Al Hosn further to reflect the emirate's increasing prominence.
Sheikh Shakhbut bin Sultan (ruled 1928-1966) Renovated and enlarged Qasr Al Hosn, adding a decorative arch and two new villas.
Sheikh Zayed bin Sultan (ruled 1966-2004) Moved the royal residence to Al Manhal palace and kept his diwan at Qasr Al Hosn.
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