Holding the rates steady, European Central Bank causes parity fluctuations with its “If the situation gets worse, we might increase asset purchases” statement. As for in the United States, markets have difficulty to find a natural direction because of economic data ranging from the positive extremes to the negatives.
The most apparent change in Turkish market after Moody’s downgrade in outlook was the upward trend in benchmark rate. While BIST continues with a flat and negative trend, there is moderate rise in Exchange Rates. Apparently, markets do not pay too much attention to Moody’s decision. However, I must admit that it was a quite right and proper rating.
Moody’s decisions deemed “null and void” in Ankara, which, according to highly-experienced experts, should be considered an official message. As interpreted by some of these experts, foreign rating agencies are trying to deliver the “You’re on the wrong track” message about Turkish economic model, while others insist that this was a political message indicating Turkey’s military operation in Afrin.
Maybe two messages are delivered at the same time: “It wasn’t a good idea to launch a military operation which may cause political conflict with the West, especially these days when Turkish private sector is struggling with a massive external debt, current account and budget deficits are growing day by day.”
“What needs to be done is done, but…”
We can make as many assumptions as we want all day long about the message hidden in Moody’s decision on Turkey’s economic outlook, however, it won’t help us achieve anything useful. So, if you don’t have enough power or opportunity to change the circumstances, then we should swallow such implications and carry on. However, if Turkish government decides to give itself a reason for re-designing the current economic model by pretending to take those messages really serious for going for a complete policy change, it wouldn’t be such a bad move.
We may even create a slogan, “We do it for our own sake, not because they told us to do it”. As a matter of fact, Government took some key steps regarding foreign currency loans. As of May, businesses requesting to borrow foreign currency loans will have to pass through a fine filter.
Unfortunately, it’s not easy to find a quick solution to foreign trade deficit and current account deficit. Each and every policy adopted up until now has failed. So, Turkey must come up with even more extraordinary and ingenious ideas.