Fitch Commends Türkiye’s Economic Policy, Warns of Reversal

Flags of Türkiye adorn a commercial street in Ankara (Reuters)
Flags of Türkiye adorn a commercial street in Ankara (Reuters)
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Fitch Commends Türkiye’s Economic Policy, Warns of Reversal

Flags of Türkiye adorn a commercial street in Ankara (Reuters)
Flags of Türkiye adorn a commercial street in Ankara (Reuters)

Fitch Ratings has upgraded Türkiye’s rating to ‘B+’ from ‘B’ and changed its outlook from ‘stable’ to ‘positive.’ This is because Türkiye has tightened its monetary policy since June 2023, following changes in the economic team after the elections in May.

The tightening of monetary policy has been stronger and faster than expected, which has helped reduce financial stability risks. Despite this, inflation has continued to rise, reaching a 15-month high in February.

Fitch expects inflation to decrease but remain high. It predicts it will average 58% in 2024 and end the year at 40%, which is above the central bank’s target.

Fitch warns against easing monetary policy too soon or providing extra stimulus, as this could undermine the positive effects of recent policy changes.

It also predicts Türkiye’s economy to grow by 2.8% this year and 3.1% in 2025. However, it does not expect any changes in Türkiye’s monetary policy after the local elections in March.

Overall, Türkiye’s financial stability is expected to improve in the coming months, with inflation slowing down and the current account deficit narrowing.

The agency ruled out any changes in Türkiye’s monetary policy after the local elections scheduled for March 31.

Last September, Fitch kept Türkiye’s foreign currency long-term credit rating at ‘B’ and revised its outlook from ‘negative’ to ‘stable.’ Its next report on the Turkish economy is expected in September this year.

Turkish Finance Minister Mehmet Simsek said the rating upgrade was a concrete result of the government's economy program as well as its rule-based and predictable policies.

"Macrofinancial stability will be further strengthened and our credit rating will increase in H2 with disinflation, narrowing current account deficit and budget discipline," Simsek added on social media platform X.



US Consumers to Bargain Hunt in Annual ‘Black Friday’ Spree

 A family eats lunch near a store advertising a Black Friday sale at the Pentagon City Mall in Arlington, Virginia, on November 22, 2023. (AFP)
A family eats lunch near a store advertising a Black Friday sale at the Pentagon City Mall in Arlington, Virginia, on November 22, 2023. (AFP)
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US Consumers to Bargain Hunt in Annual ‘Black Friday’ Spree

 A family eats lunch near a store advertising a Black Friday sale at the Pentagon City Mall in Arlington, Virginia, on November 22, 2023. (AFP)
A family eats lunch near a store advertising a Black Friday sale at the Pentagon City Mall in Arlington, Virginia, on November 22, 2023. (AFP)

US shoppers are coming out in force this holiday season, but the festiveness is being tempered by inflationary pressures that have abated but not completely faded.

After the sticker shock during the latter stages of the pandemic, a familiar frustration has settled in towards consumer prices that remain broadly elevated even if they have stopped rising rapidly.

Americans are "ready to open their wallets this holiday season," said the Conference Board ahead of Black Friday -- the day after Thanksgiving, which this year, falls on November 28 -- that traditionally sees US stores kick off the Christmas shopping season with steep discounts.

"US consumers plan to spend more than last year, but inflation reduces how far their dollars can go."

In this environment, nobody expects to pay the full price for items.

"Holiday shoppers are likely to increase their budgets this year versus last year but remain selective and are looking for discounts," said a note from Morgan Stanley.

The investment bank's survey found that 35 percent planned to spend more this holiday season. But nearly two-thirds would skip a purchase if an item is not adequately discounted, meaning a price cut of more than 20 percent.

"It's gonna be a good year, but I don't think that growth is going to be spectacular because consumers are still under pressure," predicted Neil Saunders of GlobalData.

Inflation remains above the Federal Reserve's two percent long-term target, rising in October to 2.6 percent on an annual basis from 2.4 percent in September. But that's significantly below the peak level of 9.1 percent in June 2022.

Other recent economic data has been solid. Unemployment remains low at 4.1 percent, while a preliminary GDP reading for the third quarter came in at 2.8 percent.

But Joe Biden's presidency coincided with about a 20 percent rise in consumer prices as Covid-19 pandemic lockdowns gave way to supply chain bottlenecks.

That inflation played a central role in the 2024 US presidential election, with Republican Donald Trump defeating Biden's appointed Democratic successor, Vice President Kamala Harris.

"There is still a perception among consumers that things are quite difficult," Saunders said. "So people are being quite cautious and careful in their spending."

- Tariff hit? -

How Trump's looming presidency will affect inflation remains to be seen. Industry groups have warned that tariffs favored by the Republican could reignite pricing pressures.

The National Retail Federation projected that a Trump tariff proposal floated during the campaign would dent US consumer budgets by as much as $78 billion annually.

But while tough potential trade actions are already preoccupying Washington trade groups, tariffs are not on consumer radars for the 2024 season, according to Saunders.

One challenge this year will be the shortness of the season.

Black Friday falls at the latest possible date on November 29, shortening the stretch between Turkey Day and Christmas on December 25.

But the impact of that dynamic on 2024 sales should not be overstated. Retailers in recent years have pulled the holiday shopping season ahead, with some vendors launching online "Black Friday" promotions as early as October.

Among the companies that have already begun discounts: the big-box chains Walmart and Target, electronics giant Best Buy and home-improvement retailer Home Depot.

Amazon officially launched "Black Friday Week" on Thursday.

NRF has projected holiday spending growth of between 2.5 and 3.5 percent in the 2024 season compared with the year-ago period, to as much as $989 billion over the two-month period.

Economists with the trade group have pointed to an easing of gasoline prices as a supportive factor.

Online sales are projected to grow as much as nine percent this season, extending a long-term trend. Black Friday itself has become a big occasion for online shopping, along with "Cyber Monday" three days later.

"Over time, we've moved from a period where it was just Black Friday, and maybe a little of the weekend, to it being a period of discounting that starts very early," said Saunders. "It's seasonal discounts."

There has been a diminishment of "doorbuster" sales that are known to draw hordes of waiting crowds, sometimes resulting in injury or worse.

Instead, increasing numbers of consumers are spreading out their purchases or opting to click through Black Friday promotions at home.