Barclays: We expect continued growth in Turkiye’s foreign exchange reserves

Following the annual analysis of the Turkish economy by the international credit rating agency Moody’s, the British bank Barclays also published a report. In the report, it was emphasized that the Central Bank of the Republic of Turkiye is expected to continue the increase in foreign exchange reserves.

“We expect an additional $17 billion recovery in foreign currency reserves from mid-August to the end of 2024. Since the elections, the CBRT has increased its gross reserves by $17 billion, but we expect the trend to slow down by another $2 billion for the rest of the year, as seasonality reverses in the fall. Our methodology shows an additional $14 billion recovery in reserves in 2024. The improvement in foreign exchange reserves will be greater if funding flows from the UAE come in more front-loaded than we expected.” Barclays’ report states.

In the annual analysis of the international credit rating agency Moody’s on the Turkish economy, “Before the elections, the CBRT intervened to limit the rate of depreciation in the exchange rate. This caused significant decreases in reserves. However, the evidence shows that major currency interventions are now over.”

In the analysis, it was emphasized that the market-induced depreciation of the Turkish lira helped exporters regain their competitiveness, while enabling the CBRT to regain its foreign exchange reserves.

Central Bank’s reserves carried their upward trend to the 8th week

Meanwhile, the gross reserves, which were at the level of $98.5 billion as of the end of May this year, rose to $115.6 billion as of the week of 4 August.

While the upward trend in reserves was carried over to the 8th week in a row, the increase in reserves in the last 2 months reached $17.1 billion. In this period, net reserves increased by $20.1 billion to $15.7 billion.

Analysts drew attention to the fact that the increase in reserves continued in August, when the return on Currency Protected Deposits (CPD) was at a record level, and stated that the steps taken by the economy administration after the election were effective in this course.

On the other hand, Turkiye’s 5-year credit risk premium (CDS) accelerated its decline and fell below 400 basis points after the statements of CBRT President Dr. Hafize Gaye Erkan at the Inflation Report Information Meeting on 27 July.

Analysts stated that this decrease in CDS level reflected the interest of foreign investors in Turkiye. This interest, which was reflected in the market indicators, was also observed at the JP Morgan Turkiye Economic Forum meeting, where Treasury and Finance Minister Mehmet Simsek and CBRT President Erkan met with foreign investors.

Source: Trthaber / Prepared by Irem Yildiz

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