Site icon Turkish Minute

Turkish economic confidence suffers biggest slump in a decade

AFP PHOTO / OZAN KOSE

Confidence in Turkey’s economy fell by the most in a decade in September with a 15.4 percent tumble, official data showed on Thursday, reinforcing concerns about a sharp slowdown as the once star emerging market combats a currency crisis, Reuters reported.

In another sign of the economic headwinds, major carmaker Tofaş said it will halt output at its Bursa plant in northwest Turkey for nine days in October due to a local market contraction, sending its shares 5 percent lower.

According to data from the Turkish Statistics Institute (TurkStat), the economic confidence index dropped to 71.0 points in September from 83.9 points a month earlier, marking its biggest drop since late 2008 and its lowest level since March 2009.

The index indicates an optimistic economic outlook when above 100 and a pessimistic one when below 100.

The lira has plunged by 40 percent this year on concerns about President Recep Tayyip Erdoğan’s influence over monetary policy and a rift with the United States, stoking inflation and undermining confidence among manufacturers.

Tofaş is one of five players in Turkey’s automotive sector, which exports some 80 percent of output and accounts for around 20 percent of total exports. Its exports jumped to 1.3 million vehicles last year but shrank 5.5 percent in August.

Domestically, the sector has been hit by a 21 percent fall in sales in the first eight months of the year, with the decline accelerating in August, when the market shrank 53 percent. Production tumbled 34 percent in the same period.

Economic data this month has gradually built up a picture of the extent of the slowdown, with confidence among Turkish manufacturers falling to a nine-year low in September.

At the same time, inflation has hit its highest in nearly 15 years and is set to top 20 percent this year. The central bank responded by hiking its key interest rate by a huge 6.25 percentage point hike this month and the government followed with an economic program aimed at restoring market confidence.

Under the plan, Turkey slashed its growth forecasts for this year and next, but failed to reassure investors who wanted a more sober assessment of the fragile economy and a sweeping plan to help banks.

Akbank, Turkey’s fifth-largest bank by assets, secured a $980 million syndicated one-year loan on Thursday, agreeing to double the premium paid on a similar loan in March and reflecting the rising risk burden for banks.

The lira has stabilized in recent weeks and firmed 0.4 percent to 6.087 against the dollar on Thursday. It has rebounded from a record low of 7.24 last month.

Reuters also reported that several large Chinese companies, including tech giant Alibaba, are actively looking at opportunities in Turkey and have met with Turkish firms after the lira’s sell-off has made local assets cheaper, according to the sources familiar with the talks.

Liked it? Take a second to support Turkish Minute on Patreon!
Exit mobile version