Turkey inflation rate eases but still stubbornly high in December

Economists forecast that double-digit core inflation would persist throughout the first half of 2018. (AFP)
Updated 03 January 2018
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Turkey inflation rate eases but still stubbornly high in December

ANKARA: Inflation in Turkey eased slightly in December after reaching the highest rate in 14 years the month earlier, but remained stubbornly high at almost 12 percent, in a continued headache for policymakers, according to statistics released Wednesday.
Consumer prices rose by 11.92 percent year-on-year in December, the Turkish statistical institute said, down slightly from 12.98 percent in November, which was the highest annual rate recorded since 2003.
On a month-on-month basis, inflation stood at 0.69 percent in December from November, with the biggest price hikes seen in transportation, while clothing prices declined.
The Turkish central bank’s official inflation target is an annual rate of five percent, but double-digit data over the last months have made a mockery of this.
Nevertheless, the bank has been unwilling to make any substantial rate hikes to combat inflation, as President Recep Tayyip Erdogan is wary that raising borrowing costs could put the brakes on growth.
Economists at QNB Finansbank in Istanbul said the December reading of 11.92 percent was the highest year-end figure since 2003.
They forecast that double-digit core inflation would persist throughout the first half of 2018 and could take longer to fall if the lira stayed weak.
“We think inflation will continue to ease over the coming months,” added William Jackson, economist at Capital Economics in London, arguing the latest reading would take some pressure off the central bank for further tightening.
“Even so, headline inflation is likely to remain in double digits until late this year,” Jackson said in a note to clients.
Erdogan has built his popularity on solid stewardship of the economy in the wake of Turkey’s devastating 2000-2001 financial crisis. Any signs of economic weakness would be a bad omen for the Turkish strongman as he prepares for 2019 elections.
Turkey notched up impressive growth of 11.1 percent in the third quarter, but economists warn this masks growing risk factors, such as inflation and a high current account deficit.


Lebanon finance minister urges new reforms after Moody’s report

Updated 14 December 2018
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Lebanon finance minister urges new reforms after Moody’s report

  • Lebanon credit default swaps surge
  • Political wrangling adds to fiscal woes

BEIRUT: Lebanon’s finance minister said on Friday that a decision by Moody’s rating agency to change the country’s outlook to negative from stable proved the need to form a government and launch reforms.
Moody’s changed Lebanon’s outlook on Thursday while affirming its B3 rating, reflecting what it called an increase in risks to the government’s liquidity position and the country’s financial stability.
Saddled with a stagnant economy and the world’s third-highest rate of debt as a proportion of gross domestic product, Lebanon is also mired in political wrangling, with rival parties unable to form a government since May’s parliamentary election.
“Moody’s report today... confirms the importance of forming a government and starting reforms to restore confidence, reduce risks and reduce the deficit,” Finance Minister Ali Hassan Khalil wrote in a tweet.
“This is possible now, but we may lose the opportunity in months if the outlook remains negative,” he added.
The cost of insuring Lebanese sovereign debt against default this week rose to its highest level since the global financial crisis of 2008.
Overnight interbank rates for Lebanese pounds hit a 2018 high of 75 percent on Thursday. Two sources Reuters spoke to on Friday familiar with the rate said it had stayed at that level, while two others said it had dropped a bit.
The rates have not been this high since November 2017, when Prime Minister Saad Al-Hariri announced, and then rescinded, his resignation in a declaration that Saudi Arabia was widely believed to have coerced him into making.
“Once you have a government, it will have a positive impact on the market. Demand for dollars will decrease and things will go down again to the normal situation,” said one trader.