Jonathan Spicer Nevzat Devranoglu
[Beirut / Ankara, 11th Reuters]-Turkey may fall into self-trapping due to military operations in Syria. The Republican leadership of the US Congress flickers the sanctions against Turkey, and if realized, the country's economy that has recovered from the recession may be hit.
Turkey fell into a currency crisis a year ago due to US sanctions and tariffs, but in recent months the currency lira has rebounded and inflation has fallen, and the economy has fallen from the worst recession in the past 20 years. Removed.
However, as the US troops withdrawn from northern Syria and the Turkish army began to attack the Kurdish forces, the currency Lira has been the lowest price in about four months.
The Central Bank of Turkey started to cut interest rates in July to promote lending, and an additional rate cut was also expected, but by 10th the expectation had fallen considerably.
If the Turkish military operations become muddy, there will be risks such as an increase in the current account deficit, rising funding costs, and tourism damage.
However, the biggest threat that has not yet been factored into Turkish assets is likely to be sanctions by US Republicans.
Senator Lindsay Gram, who is usually a strong defender of US President Trump, criticizes the president's decision to withdraw US troops. On the 9th, together with Democrats, they revealed the framework for sanctions against Turkey.
The proposal targets the assets of President Erdogan and other Turkish officials, as well as restricting visa issuance, sanctions on those involved in military transactions with Turkey and supporting the country's energy production.
According to Gram's proposal, Turkey could be subject to a wide range of sanctions over buying the Russian-made missile defense system "S400" by overcoming opposition from the United States.
<Vulnerable economy>
Ullrich Leuchtmann, head of FX research at Commerzbank (Frankfurt), said that if a wider range of sanctions were imposed, “Turkey's economic landscape has changed, and the economy weakened in the crisis of last year may fall into recession again. I have to be prepared for sex. "
It's unclear if Congress will approve Gram's proposal, or if President Trump invokes the veto right, it can be overturned by two-thirds.
Mr. Trump said this week that if Turkey crosses the line with the Syrian issue, it will “destruct” the Turkish economy, but the truth is not clear and it is not clear if he will support sanctions.
Last year, Trump urged the release of an American pastor detained in Turkey and implemented limited sanctions and increased tariffs on some imported goods.
<Lira decline, interest rate cut expected>
Rila fell nearly 30% last year. Since this week, it has dropped by more than 3% and is approaching $ 1 = 5.90 lira. According to traders, it is unclear to what level the state-owned bank will begin intervention.
This week, Turkish bonds and stocks also plummeted, and the main stock index fell more than 5%.
A senior Turkish banker said, “The relationship with the United States is an important concern, but it is still unpredictable.” At least until November 13, when Erdogan and Trump are scheduled to meet in the United States, there are concerns. He indicated that he would continue.
In the money market, up to last week, the current 16.5% policy rate was expected to fall to 13.5% at the end of the year. However, the rate cut forecast is now receding, and the year-end level that the market incorporates is 15%.
<Nationalism>
The Turkish army's invasion of Syria put new tensions on its alliance with the United States. But Erdogan states that there is a “different kind of trust” with Trump.
If the US Congress decides on new sanctions, it may cause a sense of opposition in Turkey. On the 9th, Erdogan criticized the European countries that condemned the invasion and gave a speech inspiring nationalistic feelings.
“Currently the Turkish nationalist fever is an eel upset,” pointed out by visiting lecturer at Oxford University. If the US Congress approved the sanctions, “The Ankara citizens (by purchasing the missile defense system) were right to make a decision to approach Russia, Mr. Trump was sympathetic to them, but other rulers in Washington One US Congress will be convinced that it is hostile. "
