Although it is a little bit too late, the economy administration has finally decided to intervene in markets to show to the investors that the economy is not left unattended. Unfortunate events, however, usually follow timing mistakes.
I attended Mr. Albayrak’s presentation in the Dolmabahçe Office on Friday. The presentation, however, was largely overshadowed by the fact that it was held at the wrong time. Meeting’s postponement to 2.30pm has created expectations that a prevention package will be released to stop rapidly increasing USD/TRY but it did not happen.
While Mr. Albayrak was continuing with his speech, Trump posted the following on his official social media account very early in the morning, “We have not been on good terms with Turkey lately”. All of a sudden, dollar lira exchange rate started to climb higher. Suddenly, everything became crystal clear to me while everyone was excitedly showing each other Trump’s massage.
Turkish Government actually thinks that it finally got something to use against Trump. The evangelistic pastor has clearly involved in a lot of shady affairs. Therefore, Turkey will try to use its leverage in the best possible way it can. As for the US Government, it is carrying out propaganda to exploit Turkey’s major Achilles’ heel: its financial fragility. If this conflict between Turkey and the US is not resolved until November elections, there may be big trouble ahead.
“Capturing the fire starter may not be enough to extinguish the fire…”
The cash flow coverage ratio of Turkish companies owing foreign-denominated debts is quite low. I can see that there will be a big cleaning in certain sectors, especially in those who owe large amounts of foreign currency loans. It looks like most of the companies that borrowed foreign currency loans, despite their low domestic savings ratio and the fact that they do not actually have foreign currency income, will soon fade into history.
Obviously, none of these is good news. However, medium-sized enterprises and those that carry out 50% or more of its activities in exports have far better chance to survive compared to the rest. Therefore, it may be a good idea for finance companies to provide such enterprises with funds so as to breathe a sigh of relief in the upcoming period.
Even such measures may not be enough as the Government may have to look into personal loans granted to business owners as well; because, some company owners can potentially face all kinds of risks due to the luxurious life they lead. Accordingly, banks may need to set forth some non-conventional criteria to use in their lending decision process. Staff carrying out office jobs in financial institutions should quit looking at a computer screen all day long and work more on the site to see how their debtors live and spend their money?
We found who started the fire. Capturing the perpetrator, however, may not enough to put out the fire. The culprit is still there. What we need to do is to make our best effort to lower damages.