News / Economy

    Turkey's Central Bank Hikes Interest Rates

    FILE - Turkey's Prime Minister Recep Tayyip Erdogan talks to the media in Istanbul.
    FILE - Turkey's Prime Minister Recep Tayyip Erdogan talks to the media in Istanbul.
    Dorian Jones
    Concerns are growing about Turkey's economy after Moody's cut its debt-rating outlook from stable to negative.  

    The financial rating agency blamed political uncertainty for the move and the downgrade comes at a bad time for Turkey's prime minister, who is expected to run in the August presidential election.

    The downgrade did not surprise financial markets, says analyst Atilla Yesilada, an analyst in Istanbul for Global Source Partners.

    He says since last year’s wave of anti-government demonstrations, known as the Gezi protest, there has been growing concern for the economy.

    "Since Gezi, Turkey has been suffering bout after bout of political instability, or that the economy has slowed down, or that the global financial conditions are very likely to tighten.  In such a scenario Turkey would [have an] extremely high foreign financing requirement, which I estimate to be equal to 25 percent of GDP," he said.

    Even the success of the ruling AK party in last month’s local elections is becoming a cause for concern.  Initially, investors saw the victory as a sign of continued political stability.

    But the chief economist of Turkey's Finansbank, Inan Demir, says there are concerns Prime Minister Recep Tayyip Erdogan has too much power.

    "Because there may have been concerns on Moody’s part, regarding the concentration of too much power in the name of political stability, and perhaps they may have been concerned by the pressure on central bank as well," said Demir.

    After his party's success, Erdogan called for Turkey's independent central bank to cut interest rates.  The bank nearly doubled rates in January to stave off a collapse in the currency.

    Economist Demir warns interfering in the bank’s independence will cause deep unease in financial markets.

    "The independent central bank had been a very important pillar of Turkey’s strong recovery after the 2001 crisis.  And that it would go back to market unfriendly practices of pre-2001 era, that would increase pressure on Turkey because Turkey would need strong policy-making anchors in a time of tightening global liquidity," he said.

    But political analysts say Erdogan, who is expected to run in the August presidential election, is eager to cut interest rates to help the sluggish economy.  A decade of unprecedented economic growth has been important to Erdogan’s electoral success.

    Yesilada at Global Source Partners says the election is likely to be key to determining future of the Turkish economy.

    "All rating agencies will hold and wait for the results of the presidential elections.  And if the political noise continues afterwards, I am afraid toward the end of the year we may see a rating cut which would be devastating for the Turkish bond and fixed income market," he said.
    Moody's last week downgraded the outlook for Turkey's government debt to negative, from stable. International ratings agencies like Moody's assess the economic or business strength of a bond issuer.

    Cutting the outlook means Moody's has doubts about Turkey's ability to repay bonds in the future. Even though Moody's overall debt rating for Istanbul remains at investor grade, a downgraded outlook could make it more expensive for the country to issue new bonds.

    The government has said one of its greatest achievements is that financial rating agencies have ranked Turkey's international debt as investor grade, which helps attract foreign investment and cuts borrowing costs.  

    Market watchers warn that with investors becoming more hesitant about emerging markets, Erdogan will have to carefully his balance presidential ambitions against the sensitivities of the financial markets.

    You May Like

    Video Rubio Looks to Surge in New Hampshire

    Republican presidential candidate has moved into second place in several recent surveys and appears to be gaining ground on longtime frontrunner Donald Trump

    UN Calls for Global Ban on Female Genital Mutilation

    Recent UNICEF report finds at least 200 million girls and women alive today have undergone female genital mutilation in 30 countries

    UN Pilots New Peace Approach in CAR

    Approach launched in northern town of Kaga Bandoro, where former combatants of mainly Muslim Seleka armed group and Christian and animist anti-Balaka movement are being paid to do community work

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    German Artists to Memorialize Refugees With Life Jacket Exhibiti
    X
    Hamada Elsaram
    February 05, 2016 4:30 PM
    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video Former Drug CEO Martin Shkreli Angers US Lawmakers

    A former U.S. pharmaceutical business executive has angered lawmakers by refusing to explain why he raised the price of a life-saving pill by 5,000 percent. Martin Shkreli was removed from a congressional hearing on Thursday after citing his Fifth Amendment right to stay silent. Zlatica Hoke has more.
    Video

    Video Super Bowl TV Commercials are Super Business for Advertisers

    The Super Bowl, the championship clash between the two top teams in American Football, is the most-watched sporting event of the year, and advertisers are lining up and paying big bucks to get their commercials on the air. In fact, the TV commercials during the Super Bowl have become one of the most anticipated and popular features of the event. VOA's Brian Allen has a sneak peek of what you can expect to see when the big game goes to commercial break, and the real entertainment begins.
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Solar Innovation Provides Cheap, Clean Energy to Kenya Residents

    In Kenya, a company called M-Kopa Solar is providing clean energy to more than 300,000 homes across East Africa by allowing customers to "pay-as-you-go" via their cell phones. As Lenny Ruvaga reports from Kangemi, customers pay a small deposit for a solar unit and then pay less than a dollar a day to get clean energy to light up their homes or businesses.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.
    Video

    Video Apprenticeships Put Americans on Path Back to Work

    Trying to get more people into the U.S. workforce, the Obama administration last year announced $175 million in grants towards apprenticeship programs. VOA White House correspondent Aru Pande went inside one training center outside of Washington that has gained national recognition for helping put people on the path to employment.
    Video

    Video New Material May Reduce Concussion Effects

    As the 2016 National Football League season reaches its summit at the Super Bowl this coming Sunday (2/7), scientists are trying to learn how to more effectively protect football players from dangerous and damaging concussions. Researchers at Cardiff and Cambridge Universities say their origami-based material may solve the problem. VOA’s George Putic reports.
    Video

    Video Saudi Arabian Women's Sports Chip Away at Stereotypes

    Saudi Arabian female athletes say that sports are on the front line of busting traditions that quash women’s voices, both locally and internationally. In their hometown of Jeddah, a group of basketball players say that by connecting sports to health issues, they are encouraging women and girls to get out of their homes and participate in public life. VOA’s Heather Murdock reports.
    Video

    Video A Year Later, Fortunes Mixed for Syrians Forging New Lives in Berlin

    In April of last year, VOA followed the progress of six young Syrian refugees -- four brothers and their two friends -- as they made their way from Libya to Italy by boat, and eventually to Germany. Reporter Henry Ridgwell caught up with the refugees again in Berlin, as they struggle to forge new lives amid the turmoil of Europe's refugee crisis.
    Video

    Video Zika Virus May be Hard to Stop

    With the Zika virus spreading rapidly, the World Health Organization Monday declared Zika a global health emergency. As Alberto Pimienta reports, for many governments and experts, the worst is yet to come.

    World Currencies

    EUR
    USD
    0.8926
    JPY
    USD
    116.68
    GBP
    USD
    0.6871
    CAD
    USD
    1.3751
    INR
    USD
    67.653

    Rates may not be current.