Turkey under pressure as inflation forecasts rise

Turkish Central Bank Governor Murat Uysal has sought to downplay fears over the bank’s FX reserves, and did not address a 1.5 percent drop in the lira this week. (AFP)
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Updated 30 July 2020

Turkey under pressure as inflation forecasts rise

  • Turkey’s central bank now forecasts 8.9 percent year-end inflation

ISTANBUL: Turkey’s central bank, under pressure from rising prices and a volatile drop in the lira, ratcheted up inflation forecasts on Wednesday, but its chief remained optimistic that disinflation would soon return.

Governor Murat Uysal also downplayed concerns about the bank’s depleted FX reserves, which he said would naturally fluctuate during a pandemic. He did not address a drop of as much as 1.5 percent in the currency this week that could put more pressure on that buffer.

The bank now forecasts 8.9 percent year-end inflation, up from 7.4 percent in its previous quarterly report, assuming there is no second coronavirus disease (COVID-19) wave. It expects inflation to dip to 6.2 percent by the end of 2021, up from a previous forecast of 5.4 percent.

Economists expect higher inflation by year’s end, after it edged up to 12.6 percent in June.

Analysts are split over whether the central bank could pivot to monetary tightening to address stubbornly high prices and a real rate that has been driven into negative territory by an aggressive year-long easing cycle.

The bank halted rate cuts in June and held policy steady this month. Uysal said policy was in line with the inflation forecast.

As pandemic-related demand for goods gradually eases and things return to normal, he said, “inflation will enter a falling trend beginning in July.”

Turkey has recorded nearly 230,000 COVID-19 cases, with containment measures expected to shrink the economy this year.

The lira, which tumbled this week against the dollar after two months of trading flat, was off 0.2 percent after the quarterly report and brief news conference.

Uysal said the bank — which in past quarters had steadily downgraded inflation forecasts — reversed course and raised them due in part to imports and food prices. A fall in goods and commodities should boost the current account balance, he added. 


Libya’s NOC says production to rise as it seeks to revive oil industry

Updated 22 September 2020

Libya’s NOC says production to rise as it seeks to revive oil industry

  • Libya produced around 1.2 million bpd – over 1 percent of global production – before the blockade
  • Libya’s return to the oil market is sustainable

LONDON: Libya’s National Oil Company said it expected oil production to rise to 260,000 barrels per day (bpd) next week, as the OPEC member looks to revive its oil industry, crippled by a blockade since January.
Oil prices fell around 5 percent on Monday, partly due to the potential return of Libyan barrels to a market that’s already grappling with the prospect of collapsing demand from rising coronavirus cases.
Libya produced around 1.2 million bpd — over 1 percent of global production — before the blockade, which slashed the OPEC member’s output to around 100,000 bpd.
NOC, in a statement late on Monday, said it is preparing to resume exports from “secure ports” with oil tankers expected to begin arriving from Wednesday to load crude in storage over the next 72 hours.
As an initial step, exports are set to resume from the Marsa El Hariga and Brega oil terminals, it said.
The Marlin Shikoku tanker is making its way to Hariga where it is expected to load a cargo for trader Unipec, according to shipping data and traders.
Eastern Libyan commander Khalifa Haftar said last week his forces would lift their eight-month blockade of oil exports.
NOC insists it will only resume oil operations at facilities devoid of military presence.
Nearly a decade after rebel fighters backed by NATO air strikes overthrew dictator Muammar Qaddafi, Libya remains in chaos, with no central government.
The unrest has battered its oil industry, slashing production capacity down from 1.6 million bpd.
Goldman Sachs said Libya’s return should not derail the oil market’s recovery, with an upside risk to production likely to be offset by higher compliance with production cuts from other OPEC members.
“We see both logistical and political risks to a fast and sustainable increase in production,” the bank said. It expects a 400,000 bpd increase in Libyan production by December.
The Organization of the Petroleum Exporting Countries and allies led by Russia, are closely watching the Libya situation, waiting to see if this time Libya’s return to the oil market is sustainable, sources told Reuters.