{"id":38787,"date":"2018-10-06T08:16:33","date_gmt":"2018-10-06T13:16:33","guid":{"rendered":"http:\/\/olduvai.ca\/?p=38787"},"modified":"2018-10-06T08:16:33","modified_gmt":"2018-10-06T13:16:33","slug":"loans-sour-in-turkey-inflation-hits-25-interest-rates-spike-fears-of-contagion-rise","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=38787","title":{"rendered":"Loans Sour in Turkey, Inflation Hits 25%, Interest Rates Spike, Fears of Contagion Rise"},"content":{"rendered":"<header>\n<h3 class=\"entry-title\"><a href=\"https:\/\/wolfstreet.com\/2018\/10\/05\/financial-pressures-in-turkey-bad-loans-inflation-central-bank-interest-rate\/\">Loans Sour in Turkey, Inflation Hits 25%, Interest Rates Spike, Fears of Contagion Rise<\/a><\/h3>\n<\/header>\n<div class=\"entry-content\">\n<p><strong>The economic miracle fueled by foreign-currency debt.\u00a0<\/strong><\/p>\n<p>The Bank of Turkey\u2019s decision mid-September to hike its policy rate from 17.75% to 24% may have temporarily stemmed the rout in the Turkish lira, but the hiatus is now over. This week, the pressure is back on the nation\u2019s currency, which is down almost 40% against the US dollar year to date, as well on its beleaguered banks, 20 of which were slapped with another downgrade by Fitch Ratings.<\/p>\n<p>The lenders, Fitch <a href=\"https:\/\/www.fitchratings.com\/site\/pr\/10046676\">said<\/a>, are \u201cmore likely to come under pressure as a result of the further depreciation of the Turkish lira (by about 20% against the US dollar since the last rating review), the spike in interest rates (driven by the increase in the policy rate to 24% from 17.75% on 13 September) and the weaker growth outlook.\u201d<\/p>\n<p>The banks affected include foreign-owned subsidiaries such as Turkiye Garanti Bankasi A.S. (half-owned by Spain\u2019s BBVA), Yapi ve Kredi Bankasi A.S. (part owned by Italy\u2019s Unicredit), ING Bank A.S. and HSBC Bank A.S., which were downgraded to BB- from BB, as well as large state-owned banks (B+ from BB-), all with negative outlooks. As Fitch warns, the recent interest rate hike is likely to hurt lira borrowers\u2019 debt service capacity, while exposures to the construction and energy sectors and high borrower concentrations are also \u201csignificant sources of risks at many banks.\u201d<\/p>\n<p>As long as the current climate of economic and financial instability continues, these problems are not going to go away. According to data recently published by the <a href=\"http:\/\/www.turkstat.gov.tr\/PreHaberBultenleri.do?id=27892\">Turkish Statistical Institute<\/a>, economic confidence in Turkey has sunk to a decade-low. Last week the country\u2019s Finance Minister (and President Erdogan\u2019s son-in-law) desperately tried to assure investors that he would, in classic <em>Draghi<\/em>\u00a0fashion, do \u201cwhatever it takes\u201d to support local banks, but few seem to believe that he has such means at his disposal.<\/p>\n<p>\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Loans Sour in Turkey, Inflation Hits 25%, Interest Rates Spike, Fears of Contagion Rise The economic miracle fueled by foreign-currency debt.\u00a0 The Bank of Turkey\u2019s decision mid-September to hike its policy rate from 17.75% to 24% may have temporarily stemmed the rout in the Turkish lira, but the hiatus is now over. This week, the [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[22145,1992,195,5660,22144,426,431,818,8280,839,4255],"class_list":["post-38787","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-of-turkey","tag-contagion","tag-debt","tag-don-quijones","tag-foreign-currency-debt","tag-inflation","tag-interest-rates","tag-turkey","tag-turkish-lira","tag-us-dollar","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38787","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=38787"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38787\/revisions"}],"predecessor-version":[{"id":38788,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/38787\/revisions\/38788"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=38787"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=38787"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=38787"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}