Turkey set to raise rates, balancing lira and growth concerns

The Turkish Central Bank is worried about economic slowdown. (Reuters)
Updated 12 September 2018
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Turkey set to raise rates, balancing lira and growth concerns

  • The lira has slumped 40 percent against the dollar this year, weakened partly by unease over President Recep Tayyip Erdogan’s influence on monetary policy
  • The central bank confounded expectations for a rate increase at its July meeting, fueling the belief it is under pressure from Erdogan

ISTANBUL: The Turkish Central Bank is expected to raise interest rates on Thursday to calm a currency crisis, but forecasts for the scale of the increase vary widely as the bank balances concerns over lira weakness with worries about an economic slowdown.
The lira has slumped 40 percent against the dollar this year, weakened by unease over President Recep Tayyip Erdogan’s influence on monetary policy and more recently a bitter row with the US that has unsettled investors.
The central bank confounded expectations for a rate increase at its July meeting, fueling the belief it is under pressure from Erdogan, who has called interest rates the “mother and father of all evil” and frequently urges they be kept low.
But after inflation surged in August to its highest in nearly 15 years, the central bank said that it would take action against “significant risks” to price stability — a rare move to soothe financial markets.
It said its monetary stance will be adjusted at Thursday’s policy committee meeting. Analysts saw this as pointing to an increase in the benchmark one-week repo rate, now 17.75 percent — less than the annual inflation rate of 17.9 percent.
Phoenix Kalen, strategist at Societe Generale, forecast the repo rate would be raised to 20.75 percent and would be restored as the main policy instrument after a period during which the effective funding rate has been 19.25 percent.
“Although this amount of monetary tightening may disappoint market expectations and spark renewed TRY weakness, the decision would reflect the prioritization of Turkish authorities’ concerns regarding a rapidly decelerating economy,” Kalen said.
Turkey’s economic growth slowed to 5.2 percent in the second quarter, data showed this week, and the economy is expected to slow again in the second half.
In a Reuters poll, all 11 economists predicted the benchmark one-week repo rate would be raised.
The average forecast was to 22 percent, but predictions ranged from an increase of 225 basis points to 725 basis points.


Adnoc signs deal with Eni on Ghasha concession

Updated 13 November 2018
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Adnoc signs deal with Eni on Ghasha concession

  • ADNOC grants Eni 25 percent stake in ultra sour gas project
  • Follows Adnoc award to France's Total

LONDON: The Abu Dhabi National Oil Company (ADNOC) has granted the Italian oil company Eni a 25 percent stake in an off-shore gas mega-project, in a move that will support the emirate’s efforts to become self-sufficient in gas.
The energy company is now in discussions with other potential partners for the remaining 15 percent of the available 40 percent stake in the concession earmarked for foreign companies.
The award covers the Ghasha ultra-sour gas concession just off the coast of the UAE, including the Hail and Dalma and other offshore fields. Eni will contribute 25 percent of the development cost of the project which is likely to cost billions of dollars.
The deal comes just days after ADNOC awarded a 40 percent stake to French oil firm Total on Nov. 11 to explore and develop its Ruwais Diyab unconventional gas concession.
The Ghasha gas fields are estimated to hold trillions of standard cubic feet of recoverable gas, according to a company statement.
Once on stream, the project is expected to produce more than 1.5 billion cubic feet of gas per day. This could provide enough gas to supply electricity to more than 2 million homes, said ADNOC.
The project is set to produce 120,000 barrels of oil and high-value condensate per day once complete, the company said.
“ADNOC is committed to ensuring a stable and economic gas supply to the UAE, which is a core component of our 2030 strategy,” said Sultan Ahmed Al-Jaber, UAE minister of state and ADNOC group CEO.
“Development of our Hail, Ghasha and Dalma ultra-sour gas offshore resources, at commercial rates, will make a significant contribution towards delivering that strategic imperative and bringing forward the day when the UAE will not only be self-sufficient in gas but also transitions to net exporter of gas,” he said.
Eni won its first concession rights in the emirate’s oil and gas sector earlier this year, with Adnoc granting the Italian firm a 10 percent interest in its Umm Shaif and Nasr concession and a 5 percent stake in the Lower Zakum concession in March.
“We are pursuing a strategy of growing in the Middle East and today’s signature is further confirmation of our willingness to root our presence in Abu Dhabi,
following the agreements signed last March, with Adnoc,” said Eni CEO, Claudio Descalzi, in a statement.
ADNOC is exploring opportunities beyond Abu Dhabi, having also signed a framework agreement with the Uzbek energy company, Uzbekneftegaz on Tuesday.
The agreement will see the Gulf company provide advice on Uzbekistan’s upstream and downstream operations.