3/23/2020

Türkiye is Well Prepared to Weather Any Financial Turmoil Caused by Covid-19

​​The Minister of Treasury and Finance Berat Albayrak announced that Türkiye has addressed all aspects of the road map that is being implemented in order to support sectors that may be affected by the COVID-19 prevention measures.  

Borsa İstanbul introduced a series of measures last week to limit the extreme volatility in the markets and the sharp changes in prices. Accordingly, the price margin for determining price limits of the shares traded on Borsa Istanbul have been reduced to 10 percent in all groups. Also, the price change triggering circuit breaker has been reduced to 5 percent downwards in all groups. As for the circuit breaker call period, it has been increased to 30 minutes. 

The Central Bank of the Republic of Türkiye (CBRT) cut its benchmark interest rate by 100 basis points to 9.75 percent in a special monetary policy meeting held on March 17. CBRT also announced that it would provide lira liquidity with an interest rate of 150 basis points lower than the benchmark one-week repo rate through repo auctions with maturities of up to 91 days. 

Türkiye has recovered swiftly from crises, market volatilities, and recessions in the past and is well prepared to weather any further financial turmoil. The fear factor caused by COVID-19 is likely to generate a negative sentiment shock, severely depressing consumption, tourism revenues, and in-store retail sales globally. However, the large domestic market is a valuable asset for the Turkish economy, and the country will offset the negative sentiment by the real income gain from the plunge in oil prices. 

While COVID-19-related risks will reverse the improvement in global growth sentiment, domestic factors that determine growth momentum in Türkiye show that low dependency on externally-funded credit, dynamic domestic demand, steps taken by the government, the fall in bank lending rates, and other cyclical factors are all likely to diminish the possible future impact of COVID-19-related risks to the Turkish economy.
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