Turkish economy shrinks 2.6% in Q1 as recession bites

The Turkish lira has come under renewed pressure in recent months as investors fretted about the threat of new US sanctions. (Reuters)
Updated 31 May 2019

Turkish economy shrinks 2.6% in Q1 as recession bites

  • Turkey has been rocked by a 36 percent tumble in the lira’s value against the dollar since the end of 2017
  • Weakness in the construction and industrial sectors dragged badly on the economy in the first quarter

ISTANBUL: The Turkish economy contracted 2.6 percent year-on-year in the first quarter, in line with expectations, as the official data reinforced the country’s slide into recession after last year’s currency crisis.
The major emerging market economy, which has a track record of more than 5 percent growth, has been rocked by a 36 percent tumble in the lira’s value against the dollar since the end of 2017. Inflation shot up last year and the central bank hiked rates to slow economic activity.
A Reuters poll forecast an annual shrinkage of 2.5 percent in the latest quarter.
Compared to the previous quarter, first quarter GDP expanded a seasonally and calendar-adjusted 1.3 percent, the Turkish Statistical Institute data showed.
The data also confirmed that the Middle East’s largest economy contracted 3 percent year-on-year in the fourth quarter, its worst in nearly a decade, capping a year in which it logged 2.6 percent overall growth.
Weakness in the construction and industrial sectors dragged badly on the economy in the first quarter, while agriculture expanded.
Last year’s currency crisis, brought on by concerns over a diplomatic row with Washington and the independence of the central bank, ended years of a construction-fueled boom driven by cheap foreign capital.
The lira has come under renewed pressure in recent months as investors fretted about the threat of new US sanctions, uncertainty over local election results, declining central bank reserves and a trend of Turks ramping up foreign holdings.
Initial data for the second quarter has shown continued poor sentiment regarding the economic outlook.
The Purchasing Managers’ Index (PMI) for manufacturing fell to 46.8 in April from 47.2 in March, while consumer confidence tumbled to 55.3 points in May, its lowest level since the data was first published in 2004.
Official data on Friday showed the foreign trade deficit narrowed 55.6 percent year-on-year in April to $2.982 billion, with exports rising 4.6 percent while imports slid 15.1 percent.


Cirque du Soleil walks a tightrope through pandemic

Updated 06 June 2020

Cirque du Soleil walks a tightrope through pandemic

  • Suitors wage backstage battle to rescue debt-stricken Canadian circus icon
  • Among the potential bidders is former fire eater Guy Laliberte, who fouded the acrobatic troupe in 1984

MONTREAL: Its shows canceled due to the COVID-19 pandemic, an already heavily indebted Cirque du Soleil’s fight for survival has invited an intense backstage battle to try to save the Canadian cultural icon.

High on a list of potential suitors is former fire eater Guy Laliberte, who founded the acrobatic troupe in 1984 but later sold it.

“Its revival will have to be done at the right price. And not at all costs,” said the 60-year-old, determined not to see his creation sold to private interests.

The billionaire clown said after “careful consideration,” he decided “with a great team” to pursue a bid, but offered no details.

Under his leadership, the Cirque had set up big tops in more than 300 cities around the world, delighting audiences with contemporary circus acts set to music but without the usual trappings of lions, elephants and bears.

Then the pandemic hit, forcing the company in March to cancel 44 shows worldwide, from Las Vegas to Tel Aviv, Moscow to Melbourne, and lay off 4,679 acrobats and technicians, or 95 percent of its workforce.

Hurtling toward bankruptcy, the global entertainment giant and pride of Canada commissioned a bank in early May to examine its options, including a possible sale.

Meanwhile, shareholders ponied up $50 million in bridge financing for its “short-term liquidity needs.”

Laliberte, the first clown to rocket to the International Space Station in 2009, ceded control of the Cirque for $1 billion in 2015.

It has since fallen into the hands of American investment firm TPG Capital (55 percent stake) and China’s Fosun (25 percent), which also owns Club Med and Thomas Cook travel. The Caisse de depot et placement du Quebec (CDPQ) retains the last 20 percent.

The institutional investor, which manages public pension plans and insurance programs in Quebec, bought Laliberte’s last remaining 10 percent stake in the business in February, just before the pandemic.

Since 2015, the Cirque has embarked on costly acquisitions and renovations of permanent performance halls, while its creative spirit waned, according to critics in the Quebec press.

Meanwhile, it piled on more than $1 billion in debt.

Fearing that the Cirque would be “sold to foreign interests,” the Quebec government recently offered it a conditional loan of $200 million to help relaunch its shows as restrictions on large gatherings start to be eased worldwide.

But the agreement in principle is conditional on the Cirque headquarters remaining in Montreal and the province being allowed to buy US and Chinese stakes in the company at an unspecified time in the future, “at market value” and with “probably a local partner,” said Quebec Minister of the Economy Pierre Fitzgibbon.

“The state does not want to operate the circus, but the circus is too important to Quebec (to leave it to foreigners),” he said.

In addition to Laliberte, other prospective buyers include Quebecor, the telecoms and media giant of tycoon Pierre Karl Peladeau, whose opening lowball bid was outright rejected.

“It is essentially the value and reputation of the brand” that has piqued interest in the company, says Michel Magnan, corporate governance chair at Concordia University in Montreal.

But “as long as there are restrictions on gatherings of people, the future is not very rosy” for the Cirque, he said.

Several challenges await, according to Magnan.

“There were a lot of people working in all of these shows. Where are they now? What are they doing? How are they doing? In what shape are they, what state of mind?” he said.

“The more time passes, the more this expertise risks evaporating.”

Small consolation: The Cirque resumed its performances on Wednesday in Hangzhou, China, five months after a coronavirus outbreak in the city.