Trump rattles it further with promise to double tariffs
ANKARA, Aug 11, (Agencies) : Kuwaiti investors in Turkey are becoming jittery following the decline in the exchange rate of the Turkish lira which has fallen to record levels, reports Al-Rai daily.
The Turkish lira fell 19 percent against the dollar following the escalating diplomatic crisis between Ankara and Washington. It has been said the lira has lost about half its value since the beginning of this year.
The economists have warned of the consequences of a comprehensive economic collapse should the Turkish authorities fail to address the situation as early as possible. It is believed the Kuwaitis feel their investments are evaporating because of the crisis.
“Kuwaitis have suffered huge losses due to the devaluation of the Turkish lira,” said Qais Al-Ghanim, Secretary-General of the Real Estate Owners Union. He pointed out the investments of Kuwaitis in Turkey’s real estate are huge.
Al-Ghanim stressed on the need for the current situation to show better signs in the next few months if not weeks. He advised investors in Turkey, especially real estate investors, not to sell or buy now, saying the situation is unsatisfactory.
Al-Ghanim pointed out the crisis in Turkey is not only economic, but political, par excellence, noting that the situation is open to all possibilities, and is dependent primarily on the talks conducted by Ankara with those who impose sanctions or fees.
Al-Ghanim also pointed out that Turkey is living under the burden of debt in conjunction with rising interest rates, and expressed concern about the impact of the crisis on other sectors.
The data shows Kuwaitis come in third place after Iraqis and Saudis in terms of foreigners buying real estate in Turkey.
The figures indicate the volume of public and private Kuwaiti investments in Turkey exceeded $5 billion, while the volume of trade exchange between the two countries since 2003 is more than 5 times this amount.
In the same context, the volume of direct investment flows from the GCC countries to Turkey was about $8.2 billion between 2010 and 2014, and the vast majority of those investments are in the private sector, while the volume of construction projects carried out by Turkish companies in the Gulf countries are worth $40 billion.
A financial shockwave ripped through Turkey, when its currency nosedived on concerns about its economic policies and a dispute with the US, which President Donald Trump stoked further with a promise to double tariffs on the NATO ally.
The currency’s drop – 41 percent so far this year – is a gauge of fear over a country coming to terms with years of high debt, international concern over President Recep Tayyip Erdogan’s push to amass power, and a souring in relations with allies like the US.
The diplomatic dispute with the US was one of the triggers that turned market jitters into a full-blown route this week. Turkey has arrested an American pastor and put him on trial for espionage and terror-related charges linked to a failed coup attempt in the country two years ago. The US responded by slapping sanctions on Turkey and threatening more. The sides held talks in Washington this week but failed to resolve the spat, and Trump took advantage of Turkey’s turmoil on Friday to turn the screws on the country.
Trump tweeted that he had authorized the doubling of steel and aluminum tariffs “with respect to Turkey.”
Trump said the tariffs on aluminum imports would be increased to 20 percent and those on steel to 50 percent as the Turkish lira “slides rapidly downward against our very strong Dollar!”
“Our relations with Turkey are not good at this time!” he wrote.
Trump made the 50 percent steel tariff official with a presidential proclamation Friday evening.
The United States is the biggest destination for Turkish steel exports with 11 percent of the Turkish export volume. The lira fell further after Trump’s tweet.
In what appears to be a diplomatic riposte, Turkey later said Erdogan had held a phone call with Russian President Vladimir Putin to discuss economic ties. It did not disclose details, but suggests Turkey might gravitate further away from its NATO allies toward cooperation with Russia, whose relations with the West are at their lowest since the Cold War.
Turkey’s woes have been aggravated by investor worries about the economic policies of Erdogan, who won a new term in office in June with sweeping new powers.
Erdogan has been putting pressure on the central bank to not raise interest rates in order to keep fueling economic growth. He claims higher rates lead to higher inflation – the opposite of what standard economic theory says.
Independent analysts argue the central bank should instead raise rates to tame inflation and support the currency.
In modern economies, central banks are meant to be independent of governments to make sure they set policies that are best for the economy, not politicians. But since adopting increased powers, Erdogan appears to have greater control over the bank as well.