Turkey’s Economic Brief – 20.01.2017

Turkey’s Economic Brief – 20.01.2017

  1. Developments on the Turkish Lira

The Turkish Lira closed last week at 3.72 to the USD, however again this week we saw it decline down into the 3.80s where it currently sits at 3.82.  The Central Bank of Turkey took some measures throughout the week but was not able to control the volatility of the Lira. Central Bank of Turkey on Wednesday announced a $500 Million allocation to a forex deposit auction and opened a forex deposit auction of $300 million on Friday in an attempt to bolster the lira.  However, it has not helped increase the lira’s value. Experts expect the central bank of Turkey to increase the interest rate in order to control the fall of the lira. The Central Bank of Turkey will meet on this Tuesday 24th January where they are expected to increase the interest rates.  Furthermore, Fitch Credit Rating will be released next Friday 27th January and it should give us a better overview of the economic situation in Turkey going forward.

An increase in the interest rates and if Fitch credit ratings do not change should increase the value of the Turkish Lira against the USD.

  1. Turkey’s investment policies for foreigners

Last week, changes were made to the Turkish Citizenship laws for foreigners in order to increase investment.  Foreigners can now gain a Turkish citizenship through different types of investment.

  • Investment of $1 million in real estate (hold it for 3 years)
  • Investment of $2 million in capital (for 3 years)
  • Holding of government bonds worth $3 million (not diversified for 3 years)
  • Deposit $3 million in a Turkish bank (non-withdrawal for 3 years)
  • They employ 100 people

Time will tell whether the new citizenship rules actually do lead to higher investment.

  1. Unemployment is highest in the last 6 years

Unemployment seems to be another problem especially in this time of slow economic growth for Turkey. Unemployment stood at 11.8% in October 2016 which is highest since 2011. The unemployment among youth stood at 21.2% in October 2016 which is one of the highest in Europe. The increasing number of unemployed is worrying for the society especially for the youth who are entering the workforce. Moving forward the need for greater work opportunities especially among the youth should be of importance. Improving ties between industry and schools/universities along with promoting entrepreneurship can be one way to decrease unemployment among youth.

  1. Positive Outlook for Tourism in 2017

Till the end of November 2016, number of tourists to Turkey declined a little over 30% to 24 million from 34.77 million during the same time period in 2015.  The decline has been due to various terrorist attacks, the failed Coup attempt, and problems with the Russian government after a Russian jet was shot down in late 2015. The number of Russian tourists is important for the sector due to high number of annual Russian tourists to Turkey. In 2014, 4.4 million and in 2015 3.6 million Russian tourists visited Turkey coming second only to German tourists. In 2016, only 822 thousand Russian tourists came to Turkey, a steep decline from previous years. However, since the normalization of ties with Russia, Russian tourists have begun to turn back to Turkey. The Turkish tourism sector is expecting higher numbers from last year especially in terms of Russians tourists who are set to visit Turkey this year. The initial news are good based on the early reservations by Russian and Israeli tourists to hotels.

 

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