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Unemployment rate in Turkey rises to 10.8 percent in the December-February period

Monday 16/April/2018 - 01:50 PM
Sada El Balad
edited by: Basant Ahmed
Turkey’s lira was a touch weaker on Monday after plumbing a series of record lows last week، as investor alarm about double-digit inflation has been heightened by President Tayyip Erdogan’s drive for lower interest rates، Reuters reported.
The sell-off in the lira - it is one of the worst performing emerging-market currencies this year، down more than 7 percent against the dollar - highlights the divide between Erdogan and international investors over monetary policy.

The president، a self-described “enemy of interest rates” wants to keep borrowing costs low to stimulate growth، particularly through construction projects، ahead of next year’s elections. Investors fear the central bank is unable to rein in inflation because of pressure from Erdogan.

“The government appears determined to keep the economy growing rapidly ahead of national elections scheduled for November 2019، regardless of the costs،” Moody’s said in a note on Monday، adding that the weakness in the lira was “credit negative” for Turkey’s sovereign debt rating.

“This tense situation is an important test of the delicate balance between Turkey’s fundamental strength from its dynamic economy and very strong fiscal metrics – and its high and rising external vulnerability،” Moody’s said.

Economists say the lira’s slide is a reflection of entrenched inflation and wage growth and that interest rates need to be raised to arrest its fall.

The lira was at 4.0954 to the dollar at 0912 GMT، slightly softer from Friday’s close. Last week it set a record low of 4.1944. It was trading at 5.0643 against the euro after setting a record low of 5.1914 last week.

Lira and emerging market performance YTD - reut.rs2GTYCxl

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