International Ice Hockey Federation (IIHF) has stripped Belarus of the right to hold the World Championship this year
Russian opposition activist Alexei Navalny arrested on arrival as he returns home
LONG READ: The oligarch problem
COVID-19 and Trump’s indifference helped human rights abusers in 2020
Russian opposition activist Navalny calls for supporters to take to the streets this weekend
One of Russia’s biggest wood product companies, Segezha could be Sistema’s next IPO
Oligarchs trying to derail Ukraine’s privatisation programme, warns the head of Ukraine’s State Property Fund
New Ukrainian VC firm QPDigital aims to invest up to $100 million in digital startups
OUTLOOK 2021 Lithuania
EBRD says loan to Estonia’s controversial Porto Franco project was never disbursed
Estonian premier quits after Tallinn development scandal
Czech Pirates and Mayors approve final coalition agreement for 2021 elections
OUTLOOK 2021 Czechia
BRICKS & MORTAR: Rosier future beckons for CEE retailers after year of change and disruption
OUTLOOK 2021 Hungary
Hungarian government remains silent after Capitol riots
World Bank expects modest recovery for Europe and Central Asia in 2021
OUTLOOK 2021 Slovakia
FDI inflows to CEE down 58% in 1H20 but rebound expected
Slovakia to invest €1.2bn in digitisation
Corona-induced slump in global clothing sector dragged down Albania’s 2020 exports
BALKAN BLOG: The controversial recipe for building up Albania
Heavy flooding causes chaos in parts of Southeast Europe
Vodafone Albania plans €100mn infrastructure investments after AbCom merger
Turnover rose on Bosnia's two stock exchanges in 2020 while prices fell
Storming parliaments: New Europe's greatest hits
Kyiv accuses Bosnian President Dodik of lying about icon gifted to Russian foreign minister
Bulgaria’s government considers gradual easing of COVID-related restrictions
Sofia-based LAUNCHub Ventures holds first close of new fund on €44mn
ING THINK: Growth in the Balkans: from zero to hero again?
Labour demand down 28% y/y in Croatia in 2020
Zagreb Stock Exchange's Crobex10 index at highest level since March 5
OUTLOOK 2021 Kosovo
Arrera Automobili aims to launch Albania’s first supercar
Transparency International warns of high corruption risk in CEE defence sectors
OUTLOOK 2021 Moldova
World Bank revises projection for Moldova’s 2020 GDP decline to 7.2%
Moldova’s PM resigns to prepare the ground for early elections
Montenegrins say state administration is most corrupt institution
75% of Montenegrins want EU membership
Montenegro’s new ruling coalition carves up top state jobs
OUTLOOK 2021 Montenegro
North Macedonia's manufacturing confidence indicator down by 8.5 pp y/y in December
OUTLOOK 2021 North Macedonia
OUTLOOK 2021 Romania
Romania’s central bank cuts monetary policy rate by 25bp to 1.25%
Romanian construction companies' activity slows in November after intense 2020
OUTLOOK 2021 Serbia
Serbia to launch talks with IMF on new reform programme
Slovenia’s opposition files no-confidence motion against Jansa cabinet
Slovenia’s government to release funds to news agency STA after EU pressure
UK Moneyhub picks Slovenia for post-Brexit European base
Slovenia’s dire COVID-19 situation in 4Q20 caused second economic dip
Turkcell denies any affiliation with $1.6bn loan in default extended by Ziraat Bank to Virgin Islands company
BEYOND THE BOSPORUS: Let’s tentatively pencil in a date for Turkey’s hot money outflow
Armenia ‘to extend life of its 1970s Metsamor nuclear power plant after 2026’
OUTLOOK 2021 Armenia
COMMENT: Record high debt levels will slow post-coronavirus recovery, threaten some countries' financial stability, says IIF
Armenia’s PM cautions conflict with Azerbaijan “still not settled” after trilateral meeting with Putin
OUTLOOK 2021 Georgia
Georgia’s political kingpin Bidzina Ivanishvili quits politics
Modern-day “Robin Hood” inspires Georgians drowning in debt
Durov rejects Western funds’ offer to buy 5%-10% of Telegram with $30bn valuation
Iran’s navy conducts missile drill while analyst argues Trump even capable of nuclear strike in final days
TEHRAN BLOG: Who’s more credible? Johnson backing Trump’s Nobel chances or Iran applauding arrest warrant for US president?
Central Asia vaccination plans underwhelm, but governments look unruffled
Sole lowcost Kazakh airline FlyArystan makes 2020 gains
Fears of authoritarianism as Kyrgyz populist wins landslide and backing for ‘Khanstitution’
OUTLOOK 2021 Kyrgyzstan
Mongolia's winter dzud set to be one of most extreme on record says Red Cross
Mongolian coal exports to China paralysed as Beijing demands virus testing of truck drivers
Mongolia fears economic damage as country faces up to its first local transmissions of coronavirus
Mongolia in lockdown after suffering first local coronavirus transmissions
OUTLOOK 2021 Tajikistan
China business briefing: Not happy with Kyrgyzstan
OUTLOOK 2021 Turkmenistan
Turkmenistan: How the Grinch stole New Year
Turkmenistan: The dammed united
COMMENT: Uzbekistan is being transformed, but where are the democratic reforms?
OUTLOOK 2021 Uzbekistan
Download the pdf version
Humble pie and a bitter pill were on the menu for Recep Tayyip ‘Erdoganomic’ Erdogan on November 19 and the Turkish despot swallowed both as Turkey’s central bank bowed to market realities by announcing a hike in its main policy rate (the one-week repo) by 475bp to 15%. As will be explained, however, behind the scenes sleights of hand will be made to ease the indigestion that, while shielding the beleaguered Turkish lira, threatens to constrain already fragile economic growth.
Funding will be provided through the main policy rate, said the central bank—as it seemingly moved a couple of steps out of the shadow of a president who has often forbidden rate hikes, offering his absurd argument that they propel inflation—in a remark suggesting that yet again the market ends up taking what it wanted after another chapter of futile manoeuvering by the regulator at the end of a leash that stretches back to the presidential palace.
The end of the central bank’s rate corridor will be sold as “normalisation” and as the national lender getting back to orthodox monetary policy, but the devil remains in the detail—the central bank funds the banking system mainly through USD-TRY swaps conducted with local banks.
The central bank’s one-week swap rate has stood at 13.25% since November 3, but much bigger funding is provided at lower costs.
As of October 30, the central bank’s open swap stock with local lenders stood at Turkish lira (TRY) 348bn with a weighted average cost of 10.39% versus TRY223bn via open market operations at a weighted average cost of 13.40%. (by @burumcekci via @e507)
On November 11, Turkish banking watchdog BDDK increased local banks’ swap limits to provide USD to London at spot in exchange for lira.
As a result, the banks’ swaps with the central bank declined and the central bank’s net international reserves fell to $16.4bn—the lowest level recorded since 2004—as of November 13 from $19.6bn a week earlier.
Developments in the central bank’s short FX position and the rising lira liquidity in London will be watched in the coming period as observers weigh up the lira’s short-term destiny.
Turkey’s ongoing monetary tightening started via backdoor moves in mid-July that were unable to stop the lira crashing into a second currency crisis within just over two years. The impact of the tightening on deposit and loan rates and on loan flows and FX deposits will also be tracked in the coming period in relation to the macroeconomic direction.
However, the market—which essentially took back control of Turkey’s economy and the lira from November 9 after Erdogan’s weekend change of course led to him firing the central bank governor and accepting the resignation of his son-in-law finance minister—is not interested in the real economic direction but in the short-term gains to be had.
And who are we to argue with the course of the market? But let’s update the list of possible headaches ahead as the risk of the central bank not delivering on rate hike expectations is out of the picture now.
1-) Mercurial Erdogan can start talking in the wrong direction at any time and the market-makers can’t avoid the shower of manure that might follow.
On November 18, Erdogan actually talked:
BFW 11/18 11:55 *ERDOGAN: HIGH RATES RENDER PRODUCTION, EXPORTS IMPOSSIBLE
BN 11/18 11:54 *TURKEY PRESIDENT RECEP TAYYIP ERDOGAN SPEAKS IN ANKARA
BN 11/18 11:54 *ERDOGAN: IT'S OBVIOUS WHAT HIGH INTEREST RATES CAUSE
Markets took it on the chin but some magical invisible hands held up the lira. Beware though, the Dear Leader could speak out again at any time.
2-) End-year position closures.
We’re going through the end of November and many people will close their positions before the Christmas break.
Erdogan has a scheduled monetary policy committee (MPC) meeting on December 24.
3-) “Sleepy” Joe Biden
The “Sleepy” risk is declining sharply as Erdogan has been signalling his legendary skills in making U-turns in line with which way the Washington wind is blowing. The US establishment has been signalling back, welcoming Erdogan’s retreat.
The US Congress or courts could no doubt make trouble at any given moment over Ankara’s Russian S-400 missiles and the Halkbank indictment on dodging Iran sanctions.
4-) The virus
The coronavirus situation in Turkey and in Europe is starting to produce some chilling statistics but it seems historians looking for signature events of our times will be looking back trying to reconcile rallying markets with soaring death rates.
5-) Erdogan plans to keep pumping lira into the domestic market and that in turn will keep domestic FX and gold demand alive.
The balance between domestic demand and portfolio inflows accompanied by such moves as ending the central bank’s gold purchases makes for a delicate path, just like the attempts at absorbing rising lira liquidity in London by increasing local banks’ USD available in exchange for TRY.
6-) Will domestic political stress be curbed as Biden takes a leader he has described as an “autocrat” under his wing or might Washington push for too big a bargain that would cause Erdogan too much of a loss of face? There is nothing as yet to suggest Biden will not agree compromises acceptable to Ankara.
7-) Turkey is nothing if not capable of throwing up surprises out of thin air.
here to continue reading this article
and 5 more for free or purchase
12 months full website access including
the bne Magazine for just $250/year.
Register to read the bne monthly magazine for
Password could contain only
and have 8-20 symbols length.
Please complete your registration by confirming your
A confirmation email has been sent to the email
address you provided.
can't be empty.
No user with
this email address.
Access recovery request has expired, or you are using
the wrong recovery token. Please, try again.
Access recover request has expired.
Please, try again.
To continue viewing our content you need to complete
the registration process.
Please look for an email that was sent to
with the subject line
"Confirmation bne IntelliNews access". This email will have
instructions on how to complete registration
process. Please check in your "Junk" folder in
case this communication was misdirected in your
If you have any questions please contact us at email@example.com
Sorry, but you have used all your free articles fro
this month for bne IntelliNews. Subscribe
to continue reading for only $119 per year.
Your subscription includes:
For the meantime we are also offering a free
digital weekly newspaper to subscribers to
the online package.
Click here for more subscription options,
including to the print version of our
flagship monthly magazine:
Take a trial to our premium daily news
service aimed at professional investors that
covers the 30 countries of emerging
For any other enquiries about our
products or corporate discounts please
contact us at
If you no longer wish to receive
Magazine annual print
Website & Archive
Combined package: web
access & magazine print
Take a trial to our premium daily news service
aimed at professional investors that
covers the 30 countries of emerging Europe: