Economist Mahfi Eğilmez stated that the events of the past week had created significant risks in the economy and markets. Eğilmez pointed out that there had been a 2 trillion lira loss in the stock market, a sharp increase in interest rates and CDS premiums, and a 25 billion dollar decrease in the Central Bank of Turkey’s (TCMB) reserves. He emphasized that these developments could negatively impact Turkey’s credibility.
Former Undersecretary of the Treasury and economist Dr. Mahfi Eğilmez highlighted that the events of last week had created serious risks in the markets. In a post on social media, he emphasized that the sharp fluctuations experienced across various areas, from the stock market to the foreign exchange markets, had had negative consequences for the Turkish economy.
Eğilmez noted that the market value of the companies in the stock market had decreased by approximately 2 trillion lira, foreign investors had exited, and domestic investors had turned to foreign currency. He also mentioned that the benchmark interest rate had increased from 37.09% to 44.60%, which raised the Treasury’s borrowing costs by 7.51 percentage points.
Increased Borrowing Costs
Another significant development was the rise in Turkey’s risk premium (CDS). Eğilmez said that the CDS premium had increased from 250 basis points to 328 basis points, which had seriously raised the cost of external borrowing. He also pointed out that the TCMB had been selling large amounts of foreign currency to control the exchange rate, which resulted in a decrease of approximately 25 billion dollars in reserves.
Eğilmez noted that the banking sector had also been severely affected by this situation, with the sector experiencing a loss of about 25% in value. In response to the decline in reserves and the rise in risk premiums, the TCMB had to hold an extraordinary meeting and widen the interest rate corridor. As a result, the overnight lending rate was increased from 44% to 46%.
Impact on Credit Rating
Following these developments, Eğilmez stated that international investors had increased their criticism of Turkey. He warned that this could negatively affect the decisions of credit rating agencies in the future.
SourceÇ ekonomim.com/ekonomi/mahfi-egilmez-yasananlar-ekonomide-inanilmasi-guc-riskler-yaratmis-bulunuyor-haberi-807655
Translated by BTT
