You are being redirected to website.

 

Please Rotate your screen to portrait, for best viewing.

Byblos Bank

Economic Research

|

Search Publication Library

Country Risk Weekly Bulletin 549

August 23, 2018
Country Risk Weekly Bulletin 549

Turkish Lira to US Dollar

Source: Thomson Reuters DataStream


  • Adverse economic and monetary developments to challenge Turkey's growth prospects
    Goldman Sachs indicated that challenges to Turkey's near-term outlook have increased amid tightening domestic financial conditions, the sharp depreciation of the Turkish lira, the slowdown in growth, and a persistently high inflation rate and wide current account deficit. It noted that financial conditions have tightened since mid-April 2018 due to higher interest rates on Turkish government bonds, increased credit spreads and weaker equities. It added that higher global oil prices and a moderation in global economic activity will weigh on the country's growth prospects in coming quarters. It indicated that the lira has depreciated by about 25% in previous weeks, and that the currency crisis has been driven by political factors, such as the escalation of Turkish-U.S. tensions and the announcement of tariffs on Turkish steel and aluminum imports to the U.S. But it considered that the vulnerability of the lira has deeper economic roots, and that the authorities' failure to address the accumulated internal and external imbalances over the previous years has eroded the country's policy credibility and increased the risks of a currency crisis. It expected the currency crisis to put further pressure on Turkey's already high inflation rate, and to weigh on business and consumer confidence. It said that growth prospects depend on changes in domestic financial conditions, oil prices, fiscal policy and global activity. 

    Further, Goldman Sachs indicated that Turkish policymakers have three options to stabilize the currency. First, it noted that authorities could seek conventional means, which consist of a combination of monetary and fiscal measures, but it said that the government could fail to take sufficient measures to address the economic imbalances amid challenging funding conditions. Second, it indicated that authorities could seek external assistance, most likely from the International Monetary Fund. It noted that authorities have so far rejected the possibility of external assistance, but that they might need to resort to this option in case pressures increase. Third, it said that the government could impose capital controls, but that this would deter foreign capital inflows on which Turkey relies to fund its current account deficit.
    Source: Goldman Sachs
     

  • Egypt's economy still facing major challenges
    The International Monetary Fund indicated that Egypt's main challenges in coming years are related to its rapidly growing population, the modernization of its economy, and ensuring a modern social safety net that protects the most vulnerable in society. It expected an additional 3.5 million young Egyptians to join the labor market over the next five years, which would increase pressure in the labor market. However, it noted that a growing labor force could translate into faster economic growth if the private sector efficiently absorbs the emerging labor force. As such, it pointed out that authorities are implementing structural reforms that support private sector development, such as improving the efficiency of land allocation, strengthening competition and public procurement, as well as raising the transparency of state-owned enterprises. Further, it said that Egypt's economic performance has been constrained by the government's inward-oriented economic policies, weak governance and the state's large role in economic activity, which resulted in significant misallocation of resources. As such, the IMF called on authorities to improve the allocation of resources in order to generate higher growth rates and remove price distortions, such as energy subsidies, which impede markets from functioning efficiently. It noted that the proper pricing of energy would improve economic efficiency, while the reduction of energy subsidies would create space for spending on healthcare and education. It added that the 2018-19 budget aims to replace energy subsidies with programs that directly support the poorest households through expanded cash transfer and food subsidy programs. 
    Source: International Monetary Fund
     

  • GCC's hospitality market to reach $32.5bn by 2022
    Alpen Capital projected the size of the hospitality industry in the Gulf Cooperation Council (GCC) countries to grow from $22.9bn in 2017 to $25.6bn in 2018, $29.7bn in 2020 and $32.5bn in 2022, and to post a compound annual growth rate (CAGR) of 7.2% between 2017 and 2022. The market size covers hotel room revenues and income from serviced apartments. It anticipated revenues from the hotel room market in the GCC region to reach $25.4bn in 2022 and to grow at a CAGR of 7.25% during the 2017-22 period, while it forecast receipts from the serviced apartments market to total $7.1bn by 2022 and to expand at a CAGR of 6.6% during the covered period. It expected the hotel room market revenues to account for about 78.1% of the total hospitality market in 2022, unchanged from 2017. It anticipated the sector's long-term outlook to remain strong and to be underpinned by the governments' efforts to support tourism, large infrastructure development projects and upcoming mega events in the region, such as Expo 2020 in Dubai and the 2022 FIFA World Cup in Qatar. Further, it forecast the hospitality industry in Qatar to post a CAGR of 12.1% during the 2017-22 period, followed by Bahrain (+9.6%), the UAE (+8.5%), Oman (+7.5%), Saudi Arabia (+6.5%) and Kuwait (+6.1%). It projected Saudi Arabia's hospitality sector to account for 65.6% of the GCC's hospitality industry in 2022 compared to a share of 68.1% in 2017, the UAE's market share to rise to 23.4% from 22.3%, Qatar's share to grow to 4.3% from 3.5%, Oman's share to remain stable at 3.1%, Bahrain's share to expand to 2.2% from 1.7% and Kuwait's share to increase to 1.4% from 1.3%. 
    Source: Alpen Capital
     

Tags:
Other Publications from “Country Risk Weekly Bulletin