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🇹🇷 Turkish Gambit or Ultimatum for Erdogan⠀
📉 The MSCI Emerging Markets Index has been actively declining for several months, but it is Turkey that is in the most crisis. TRY is testing historical lows, and the country has only two options: either further devaluation or rate hikes. However, the Central Bank of Turkey is ready to continue to support risky monetary policy.
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President Erdogan is a living example of reckless self-righteousness: in his universe, high-interest rates are the main enemy of the economy. In his opinion, «economic model» should stimulate growth and job creation at the expense of lower borrowing costs for producers.
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According to official figures from TurkStat (TÜEHI), inflation for November already exceeds 21%. Food inflation is 27.11%, and the situation is out of control: the producer price inflation rate is 54.6%, and certain product groups are already in a state of hyperinflation. Private business drowning in debt (173% of GDP).
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Taking into account insurance fees, payroll taxes reach 30-40%; general unemployment − 11.5%, «youth» −22.7%. Actual employment is 45%, which means that more than 50% of the active population works for the «shadow» economy and does not pay taxes.
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In August, 57% of Turkey's public debt was tied to USD and EUR, and mandatory payments are critically complicated. There is no more recent data, but this negative trend is increasing.
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Over the past two weeks, TCMB has sold huge amounts of USD on the domestic market three times, trying to keep the exchange rate at 14 TRY, but this does not save the situation. S&P Global downgraded the outlook on Turkey's sovereign credit rating to negative. Lower rates and the disaster of the TRY rate will further affect inflation, which may reach 25-30% as early as 2022.
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Alas, the market punishes stubbornness much faster than financial amateurism. So now we do not recommend you invest in Turkish assets.
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Profits to y’all!