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Turkish Lira Flat after Touching Record Low, Cenbank Reserves Up

Turkish lira banknotes are seen in this illustration taken in Istanbul, Türkiye November 23, 2021. (Reuters)
Turkish lira banknotes are seen in this illustration taken in Istanbul, Türkiye November 23, 2021. (Reuters)
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Turkish Lira Flat after Touching Record Low, Cenbank Reserves Up

Turkish lira banknotes are seen in this illustration taken in Istanbul, Türkiye November 23, 2021. (Reuters)
Turkish lira banknotes are seen in this illustration taken in Istanbul, Türkiye November 23, 2021. (Reuters)

Türkiye's lira was mostly flat on Tuesday, after touching a new record low overnight, while bankers said the central bank's net reserves had marked their largest rise on record last week as it stopped using the reserves to support the lira.

The lira touched a record low of 26.10 against the dollar early on Tuesday during low liquidity hours and later firmed to as much as 25.55. But it later gave up those gains to stand at 26.03 at 0857 GMT, compared with a close of 26.05 on Monday.

The currency has weakened some 28% this year, largely after the re-election in late May of President Recep Tayyip Erdogan, who has since moved to backtrack on his years of unorthodox economic policy.

As part of the policy pivot, the central bank stopped using its reserves to counter forex demand and support the lira. Its net reserves had touched an all-time low of negative $5.70 billion last month after a years-long decline.

Four bankers calculated that the central bank's net forex reserves had risen by about $8.5 billion last week to around $9 billion, which would mark the largest weekly rise on record.

The largest weekly rise in net international reserves was in February 2002 with $8.2 billion.

The bank's total reserves were also expected to have risen by about $4.5 billion to stand at about $107.5 billion as of June 23.

The central bank raised its policy rate by 650 basis points last week, in the strongest signal of a return to orthodoxy, after years of loose policy despite soaring inflation under Erdogan.

The increase was lower than expected, leading some analysts to suspect that new Central Bank Governor Hafize Gaye Erkan, a former Wall Street banker, may have limited room to maneuver under Erdogan.

The bank also rolled back some macroprudential measures it has implemented in recent years as part of its "liraization" targets.

Inflation surged after a late-2021 currency crisis that was sparked by rate cuts that Erdogan had called for, based on his view that interest rates cause inflation. Annual inflation touched a 24-year peak of 85.51% in October before easing.

Monthly inflation was seen at 4.84% in June, even as the annual reading was expected to decline slightly to 39.47%, according to a Reuters poll.

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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
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Saudi Arabia's Digital Advertising Boom: Addressing Economic Leakage, Boosting Local Content

A digital advertising event recently held in Riyadh (Asharq Al-Awsat)
A digital advertising event recently held in Riyadh (Asharq Al-Awsat)

Saudi Arabia’s digital advertising sector is experiencing rapid growth, but a significant portion of its revenues is leaking to foreign platforms. To maximize the impact on the national economy, experts are calling for strategies to curb this outflow and redirect it to local channels.

The importance of retaining digital ad revenues lies in the substantial size of this market. It is estimated that approximately $1 billion in ad spent is lost annually to foreign platforms, representing a considerable loss to Saudi Arabia’s economy.

Dr. Ebada Al-Abbad, CEO of Marketing and Communications at Tadafuq, a Saudi digital advertising network, told Asharq Al-Awsat that the problem stems from the fact that although advertisers, products, and audiences are often local, the largest share of financial gains goes to foreign platforms. He estimated that 70-80% of the $1.5 billion spent on digital advertising in Saudi Arabia in 2022 went to global platforms such as Google and Facebook. This results in the national economy losing nearly $1 billion annually from this sector alone.

Al-Abbad noted that government agencies in Saudi Arabia also contribute to the outflow. He explained that public sector spending on digital advertising, intended to raise awareness among citizens and residents, frequently ends up on foreign platforms. Government spending makes up about 20-25% of the total digital ad market in the Kingdom, meaning hundreds of millions of riyals leave the country annually, weakening the local digital economy.

Al-Abbad argues that Saudi Arabia needs strong local digital ad networks to keep this revenue within the national economy. These networks would help create jobs, drive innovation, and promote cultural diversity in digital content. Developing local platforms would also enhance Saudi Arabia’s digital sovereignty by ensuring that data remains within the country and is not controlled by foreign entities.

Moreover, local networks would reduce dependence on international platforms, ensuring that the economic benefits of digital advertising remain in the Kingdom, he said, stressing that this would align with Saudi Arabia’s broader Vision 2030 goals, which emphasize building a robust, diversified economy driven by local industries and digital transformation.

Globally, the digital advertising sector is growing rapidly. In 2022, worldwide spending on digital ads reached $602 billion, and it is projected to hit $876 billion by 2026. In the Middle East and North Africa (MENA) region, the digital ad market grew to $5.9 billion in 2022, with Saudi Arabia’s market accounting for over $1.5 billion.

In other countries, the digital ad sector plays a crucial role in boosting national economies. For example, in the United States, the digital advertising industry contributed $460 billion to the GDP in 2021, about 2.1% of the total. In the UK, the sector accounted for 1.8% of GDP in 2022. This shows how important digital advertising can be in driving economic growth.

One of the key challenges facing Saudi Arabia’s digital ad sector is the dominance of global platforms like Google and Facebook, which control 60% of the global digital ad market, Al-Abbad told Asharq Al-Awsat. This dominance results in a significant outflow of revenue and allows these platforms to control digital data and content. He warned that this could undermine Saudi Arabia’s national sovereignty over its digital economy.

To counter this, he emphasized that Saudi Arabia needs to build competitive local networks that can retain a larger share of the market. This will not only keep more revenue in the country but also strengthen the Kingdom’s control over its digital data and content.