Business

Turkey’s Erdogan stays firm on interest rates, lira weakens four percent

Turkish President Tayyip Erdogan said he will never defend interest rate hikes nor compromise on the issue, NTV and other broadcasters reported on Monday, in his latest defense of recent monetary easing that has triggered a crash in the lira currency.

The lira weakened as far as 12.85 against the dollar in early trade and dipped again to 12.77 by 1150 GMT after Erdogan’s latest comments, 4.1 percent weaker on the day.

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“Tayyip Erdogan has talked from the beginning about low interest rates and says ‘this interest rate will come down’,” the president was quoted as telling reporters on his flight back from a visit to Turkmenistan.

“I have never defended raising interest rates, I don’t now and will not defend it … I will never compromise on this issue.”

Under pressure from Erdogan, the central bank has slashed rates by 400 basis points since September to 15 percent and is widely expected to ease again in December. Economists have strongly criticized the policy, pointing to inflation of around 20 percent.

Erdogan said recent exchange rate volatility was not based on economic fundamentals and that Ankara was ready to provide necessary support to boost investments, via state banks.

NTV also reported him as saying he had not changed his unorthodox view that interest rates cause inflation.

“You will see, God willing, how far inflation falls before the election,” he added. “The interest rate lobbies are seething.”

The lira has tumbled as much as 45 percent against the dollar this year – hitting a record low of 13.45 last Tuesday – with much of those losses suffered after Erdogan stepped up his defense of monetary policy.

The selloff this month is the lira’s fifth worst ever, according to Goldman Sachs research.

Currency manipulation?

At the weekend, it emerged that Erdogan had ordered a probe into possible currency manipulation.

State-owned Anadolu news agency said Erdogan tasked the State Supervisory Council, an auditing agency which reports to the presidency, to identify institutions that bought large amounts of foreign currency and to determine whether any manipulation had occurred.

Market attention was set to focus this week on gross domestic product data and November inflation figures on Friday.

A Reuters poll forecast annual inflation will hit a three-year high of 20.7 percent in November, while economists forecast the lira slide will send inflation toward 30 percent next year.

The lira’s spiral has upended household spending plans, disrupted the supply of some medications and briefly halted the sales of some other imports like cellular phones.

Many economists and opposition lawmakers have called for an immediate policy reversal and elections, while the government is standing by Erdogan’s push for monetary stimulus despite the risks.

In one outcome of the lira weakness, the CEO of Spain’s BBVA said on Monday the weaker currency had reduced the price of its deal to buy 50.15 percent of lender Garanti by more than 400 million euros at current exchange rates.

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Business

Saudi Aramco signs MoU with Samsung on localizing 5G tech

Saudi energy giant Aramco signed an agreement with Korean tech behemoth Samsung to localize 5G technology in the Kingdom.

The state-run Saudi Press Agency (SPA) reported on Thursday the signing of a non-binding Memorandum of Understanding between the two parties.

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“The proposed collaboration aims to contribute to the digital transformation of various industrial sectors in the Kingdom, such as energy, petrochemical, and manufacturing, by leveraging advanced 4G and 5G technologies capable of providing secure, fast and reliable communication, to satisfy critical business requirements of industries,” the report said.

The agreement comes after the recent launch of Aramco Digital Company. The entity was established at the seventh edition of the In-Kingdom Total Value Add (iktva) Forum and Exhibition in January.

The entity, which aims to accelerate the digital transformation in Saudi Arabia and the wider MENA region, has already signed various agreements with Zoom, Taulia Inc., DHL, Accenture and more.

In February Saudi Minister of Communication and Information Technology Abdullah Alswaha said that Saudi Arabia has attracted more than $9 billion in investments in future technologies, including by US giants Microsoft and Oracle Corp, which are building cloud regions in the Kingdom.

Microsoft will reportedly invest $2.1 billion in a global super-scaler cloud, while Oracle has committed $1.5 billion to build a new cloud region in Riyadh.

Tonomus, a subsidiary of the $500 billion signature NEOM project, said it invested $1 billion in 2022 in AI, including a metaverse platform.

These tech developments tie in with the Kingdom’s Vision 2030 plan that includes provisions to develop digital infrastructure with the aim of improving quality of life and attracting investment.

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Business

Pakistani professionals struggle with higher costs as economy on edge of collapse

Naureen Ahsan earns more than twice the average wage in Pakistan, but the school administrator says she has no choice but to homeschool her daughters and delay their London-board certified final exams because she can’t afford their education.

Like most people in the nation of 220 million, Ahsan and her husband, who owns a car servicing business, are struggling to cope with a surge in living costs triggered by the government’s devaluing the currency and removing subsidies to pave the way for the latest tranche of an International Monetary Fund (IMF) bailout needed to stave off economic collapse.

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Pakistan is no stranger to economic crises – this is its fifth IMF bailout since 1997 – but economists say the latest measures, which include higher taxes and fuel costs, are hurting educated professionals. Many say they are cutting down on necessities to make ends meet.

“We don’t eat out any more,” Ahsan told Reuters. “We no longer buy meat, fish. I’ve cut down on tissue paper and detergent. We don’t see friends, we don’t give gifts. Occasionally, we scream at each other.”

The government-mandated minimum wage is about 25,000 rupees, but with inflation at a record 31.5 percent in February, its highest rate in nearly 50 years, many people who earn much more than that say their salaries do not last the month.

Abhi Salary, one of Pakistan’s biggest fintech firms, which allows its 200,000 or so subscribers to withdraw wages in advance, says transactions have increased by more than a fifth every month for the last three months. Most people spend two-thirds of the money on groceries as they rush to stock up before prices rise again, Abhi CEO Omair Ansari said.

“Unfortunately the poor in Pakistan are left with nothing to lose,” said Abid Suleri, the Sustainable Development Policy Institute of Pakistan, an economic think tank. “Educated professionals… find their purchasing power and savings eroded, and daily consumption either unaffordable or out of reach.”

Ramadan, which began this week, is likely to add to price pressures in Muslim-majority Pakistan. Analysts predict inflation to rise to at least 35 percent a month in March and April.

During the holy month, Muslims traditionally break their daylong fast with special foods and at large family gatherings, culminating in the Eid al-Fitr festivities. This year, for many people, Ramadan means more belt tightening.

“We’re cutting down on the number of meals and the food,” said Ahmed, a senior manager at a multinational company who declined to give his family name because he was worried about possible backlash from his employer. “It will be more difficult to buy sweets and gifts for Eid, which is a break from our family tradition.”

The economic turmoil is driving some professionals out of the country. Khaliq, a doctor who also didn’t want to be give his full name because he was embarrassed by his financial situation, said he and his wife, who is also a doctor, work as much as they can to save up for exams to qualify them to work in Britain.

“We think twice about eating out or using the car,” he said, adding that the weakening rupee was making the cost of their exam, which is in British pounds, higher by the day. “We plan to pass the exams and move out ASAP.”

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Business

Russia’s economy will adapt to sanctions by 2024: PM

Russia’s economy will have finished adapting to Western sanctions by 2024, Moscow’s prime minister said Thursday, saying that his country had survived the international attempts to isolate it.

After the Kremlin sent troops to Ukraine last year, Moscow’s economy was hit with a flurry of sanctions and the exit of major Western companies — as well as the departure of thousands of educated Russian professionals.

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In a speech to the Russian parliament, Prime Minister Mikhail Mishustin acknowledged the damages from the sanctions but vowed a quick recovery.

“Let’s be realistic, the outside pressure on Russia is not weakening,” he said.

“But we still expect that the adaptation period will end in 2024 already. Russia will embark on the path of long-term progressive development,” he said.

Mishustin spoke a day after President Vladimir Putin hosted his Chinese counterpart Xi Jinping in Moscow for a meeting that highlighted their growing economic ties and a united front against the West.

Mishustin welcomed “strengthening cooperation with friendly countries, with those who share our views and values.”

Echoing comments by Putin, Mishustin said the West’s sanctions, “unmatched in recent history,” were aimed at ordinary Russians.

“Russian people were the target,” Mishustin told the Duma deputies, “but we survived.”

According to the Rosstat national statistics agency, Russia’s economy contracted 2.1 percent last year.

The International Monetary Fund expects a slight increase of 0.3 percent this year.

Appointed in 2020, Mishustin said his government’s priorities were to “give our soldiers all necessary help” and “improve the welfare of citizens.”

He added that the Russian minimum wage, currently 16,242 rubles a month (around $215), would be raised by 18.5 percent — above current inflation rates — from next January.

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