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Turkish Lira at New Low, Central Bank Seen Sticking to Playbook

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
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Turkish Lira at New Low, Central Bank Seen Sticking to Playbook

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)
A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, on August 8, 2018. (Getty Images)

The Turkish lira plumbed more record lows on Monday, touching 7.6 against the dollar, as expectations grew that the central bank would keep its key interest rate steady this week but continue to tighten credit via other measures.

Analysts including those at Goldman Sachs said the bank would likely use its policy meeting on Thursday to nudge up its late liquidity window (LLW), which at 11.25% is the highest of a handful of interest rates that it controls.

That could help protect the lira - which has tumbled 22% this year and lost half its value since the end of 2017 - from a more dramatic fall.

But analysts said such a move would probably only delay a formal hike to the key policy rate that has remained at 8.25% since May.

The currency was at 7.5900 at 0917 GMT, 0.3% weaker than Friday’s close.

It has dipped in 13 of the last 15 sessions and is among the world’s worst performers in 2020 in part due to aggressive monetary easing over the last year that left real rates deeply negative.

The bank is reluctant to restrict growth just as the economy is recovering from a nearly 10% contraction in the second quarter due to the pandemic. It also expects inflation to dip, although price rises have remained stuck in double-digits.

While most economists polled by Reuters expect no formal hike this week, they predict the central bank will continue to take steps to raise the weighted average cost of funding , which has climbed to 10.4% from 7.3% in two months.

Among the minority, Deutsche Bank said it expects a 200 basis-point rise in the key one-week repo rate on Thursday.

But Kevin Daly at Goldman Sachs said the bank would rather likely raise the LLW to 12% given the combined pressure of depleted reserves, the hit to the tourism sector, and Turkey’s heavy external loan payment schedule through year end.

Ehsan Khoman at MUFG Bank forecast a rise in LLW to 11.75%. “The main risk ... is that the authorities tighten policy too little and too late as they prefer to remain supportive of growth, a policy course which would add to the risks around the lira,” he wrote.

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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.