Turkish Lira Teeters Near Record Low as Erdogan Secures Victory 

Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
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Turkish Lira Teeters Near Record Low as Erdogan Secures Victory 

Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)
Turkish President Recep Tayyip Erdogan, accompanied by his wife Emine Erdogan, addresses his supporters at the Presidential Palace in Ankara, Türkiye, May 28, 2023. (Presidential Press Office/Handout via Reuters)

Türkiye's lira wobbled near record lows against the dollar as President Recep Tayyip Erdogan secured victory in the country's presidential election on Sunday, extending his increasingly authoritarian rule into a third decade.

 

The currency was at 20.05 to the dollar during Asian hours, just shy of the 20.06 record low hit on Friday.

 

The lira, prone to sharp swings before regular trading hours, has weakened more than 6% since the start of the year and lost more than 90% of its value over the past decade with the economy in the grip of boom and bust cycles, rampant bouts of inflation and a currency crisis.

 

Since a 2021 crisis, the authorities have taken an increasingly hands-on role in foreign exchange markets with daily moves having become unnaturally small and mostly recording a weakening while FX and gold reserves have dwindled.

 

"The current set up is just not sustainable," said Tim Ash at BlueBay Asset Management. "With limited FX reserves and massively negative real interest rates the pressure on the lira is heavy."

 

Erdogan prevailed despite years of economic turmoil which critics blame on unorthodox economic policies which the opposition had pledged to reverse.

 

"An Erdogan win offers no comfort for any foreign investor," said Hasnain Malik, head of equity research at Tellimer.

 

"Only the most optimistic would hope that Erdogan now feels sufficiently secure politically to revert to orthodox economic policy."

 

Erdogan's surprisingly strong showing in the first round of the election two weeks ago had triggered a selloff in Türkiye's international bonds and a spike in costs to insure exposure to its debt amid fading hopes of a change in economic policy.

 

The nation's dollar bonds slipped to their lowest in at least six months last week, while the cost of insuring exposure to Türkiye's debt via credit default swaps (CDS) rose to a seven-month high.

 

On Monday, the bond maturing in 2036 was stable, Tradeweb data showed. CDS too were steady after closing at 666 basis points on Friday. It was around 480 bps before the election.

 

In his victory speech, Erdogan acknowledged that inflation was the most urgent issue, but said it would also fall, following the central bank's policy rate that was cut to 8.5% from 19% two years ago.

 

Analysts were cautious in how much economic change Erdogan's new government would herald.

 

"Erdogan is unlikely to embrace an outright economic orthodox approach," Wolfango Piccoli, co-president at advisory firm Teneo said in emailed comments.

 

"However, some adjustments to the current heterodox approach could be adopted with the aim of gaining time ahead of the March 2024 local elections."

 

Trading is expected to be thin on Monday, with many markets in Europe, as well as the United States closed for holidays.



Saudi Arabia’s Private Sector Ends 2024 with Strongest Sales Growth

 The Saudi capital, Riyadh (AFP)
 The Saudi capital, Riyadh (AFP)
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Saudi Arabia’s Private Sector Ends 2024 with Strongest Sales Growth

 The Saudi capital, Riyadh (AFP)
 The Saudi capital, Riyadh (AFP)

Saudi Arabia’s non-oil private sector concluded 2024 on a high note, with significant increases in sales and business activity fueled by robust domestic and international demand.
The Kingdom’s non-oil GDP is expected to grow by over 4% in both 2024 and 2025, supported by notable improvements in business conditions, according to Riyad Bank’s Purchasing Managers’ Index (PMI) report.
Despite inflationary challenges, the Riyad Bank PMI recorded 58.4 points in December, reflecting strong and accelerated economic recovery, albeit slightly lower than November’s 59.0 points.
The solid performance highlights improvements across non-oil sectors, with new business activity in December growing at its fastest pace in 12 months. This growth reflects rising domestic and global demand. Renewed marketing efforts and strong customer demand encouraged companies to boost production and expand operations, particularly in wholesale and retail.
The PMI has remained above the neutral threshold of 50.0 points since September 2020, signaling continuous expansion in Saudi Arabia’s non-oil economic activity.
The International Monetary Fund (IMF) previously projected sustained momentum in Saudi Arabia’s non-oil reforms, estimating non-oil GDP growth for 2024 at between 3.9% and 4.4%. The IMF noted that growth could reach 8% if reform strategies are fully implemented.
Expansion in International Markets
A surge in exports was among the key factors driving non-oil economic growth in Saudi Arabia. December saw the largest increase in export orders in 17 months, underscoring the success of Saudi policies in opening new markets and fostering strong international trade relationships, supported by ongoing product innovation.
Higher domestic and international demand boosted production levels in December. Companies also worked to enhance operational efficiency, leading to a notable increase in inventory. Purchasing activity accelerated to its highest level in nine months, reflecting the sector’s ability to effectively meet rising demand.
Cost Pressures on Production
Despite significant growth in production and sales, the sector continues to face challenges related to sharp inflation in input costs, driven by heightened demand for raw materials. These pressures have led to higher product prices, although some companies opted to reduce prices to remain competitive and address elevated inventory levels.
Meanwhile, wage cost increases were less pronounced, helping mitigate economic pressures related to salaries.
Future Outlook
Dr. Naif Al-Ghaith, Chief Economist at Riyad Bank, highlighted the positive end to 2024 for the Kingdom’s non-oil private sector, reflecting the progress achieved under Saudi Arabia’s Vision 2030. He noted that the PMI score of 58.4 points demonstrates the sector’s resilience and ongoing expansion.
Al-Ghaith expects non-oil GDP to grow by over 4% in 2024 and 2025, driven by improved business conditions and rising new orders, signaling increased market confidence and demand. Elevated domestic demand and export growth have pushed total sales to their highest level in a year. This, in turn, has led to strong increases in business activity and inventory levels, demonstrating the sector’s ability to meet and capitalize on excess demand, he underlined.