Turkey interest rate cut to dampen foreign investor appeal

Low interest rates are expected to undermine Turkey’s ability to appeal to domestic and foreign investors. (AFP)
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Updated 19 January 2020

Turkey interest rate cut to dampen foreign investor appeal

  • The latest 75 basis point cut on Jan. 16 follows four consecutive cuts during the last four monetary policy meetings that were held last yea

LONDON: Turkey’s move to cut interest rates highlights the country’s economic fragility and its exposure to geopolitical risk, say analysts.

The latest 75 basis point cut on Jan. 16 follows four consecutive cuts during the last four monetary policy meetings that were held last year. In a bid to stimulate growth, President Recep Tayyip Erdogan also hinted recently about the forthcoming interest rate cuts. 

However, low interest rates are expected to undermine Turkey’s ability to appeal to domestic and foreign investors.

Foreign direct investment remains muted, totaling about $5.9 billion in 2019, and mostly concentrated on the real estate sector. Iraqi citizens were the main buyers of Turkish properties last year, followed by Iranians, Russians, Saudi Arabians and Afghans.

The current account deficit is also alarming for many economists and investors. 

Struggling to recover from an economic recession since the summer of 2018, the Turkish lira lost more than a third of its value against the dollar over the last two years.

The aggressive foreign policy moves of Turkey’s government, first in Syria and now in Libya and the eastern Mediterranean, may also increase the country’s economic fragility especially considering impending sanctions from the US over its purchase of a Russian missile defense system. The deployment of Turkish forces and their ongoing training process, along with the drones and armaments that are being sent to support them, are also a burden to the economy. 

Wolfango Piccoli, co-president of Teneo Intelligence in London, said the rate cut had shown once more that the government’s priority remains growth and not regaining credibility. 

“The positive external backdrop means that Turkey is likely to get away with limited costs. However, this won’t last forever. There is still no indication that the government is serious in tackling the long term challenges the economy faces,” he told Arab News.

The Turkish Central Bank’s next Monetary Policy Committee is set for Feb. 19.

The dismissal of the former governor of the Central Bank, Murat Centinkaya, by President Erdogan in July sparked criticism about the independence of the bank and was considered a sign of Erdogan’s determination to keep lower interest rates by appointing a new figure closer to him. 


NMC Health removes CEO amid investigation of UAE firm’s finances

Updated 27 February 2020

NMC Health removes CEO amid investigation of UAE firm’s finances

  • Chief Executive Prasanth Manghat was dismissed with immediate effect
  • Chief Operating Officer Michael Davis was appointed as interim CEO

NMC Health has removed Chief Executive Prasanth Manghat with immediate effect and granted its finance chief extended sick leave, as more details emerge from an investigation into the UAE health care firm’s finances.
Abu-Dhabi based NMC said after Wednesday’s market close that it had appointed Chief Operating Officer Michael Davis as interim CEO to succeed Manghat and said Chief Financial Officer Prashanth Shenoy had been placed on longer leave.
Manghat had been with NMC for about 10 years in various roles, including deputy CEO and CFO, and had seen the company through its 2012 listing on the London Stock Exchange.
The moves are the latest blow for the firm whose shares have lost about two thirds of their value since US-based short-seller Muddy Waters late last year questioned its financial statements.
NMC had said at the time that the report was “false and misleading,” but had opened its own investigation into company finances. The review is being led by Louis Freeh, who was director of the Federal Bureau of Investigation in the United States from 1993 to mid-2001.
NMC on Wednesday said the investigation committee had identified supply chain financing arrangements that were entered into by the company and “which are understood to have been used” by entities controlled by founder BR Shetty and former vice-chair Khaleefa Butti Omair Yousif Ahmed Al Muhairi.
Reuters was unable to reach Manghat, Shetty and Muhairi for comment outside business hours on NMC’s latest statement.
The company, which operates clinics and hospitals, specialized maternity and fertility clinics, and long-term care homes in 19 countries, said the committee was reviewing a drawdown of its facilities that had not been disclosed or approved by the board.
Its shares closed 6.6% higher before Wednesday’s statement.
NMC also said it had suspended a member of its treasury team over possible discrepancies in its bank statements and ledger entries, and said it would be unable to publish its annual results till at least the end of April.
Indian billionaire Shetty resigned as NMC’s co-chairman this month, after British regulators said they were looking into NMC following a disclosure that he had misstated the size of his stake.
Shetty had said this month that his NMC shareholdings were under a legal review looking into a large portion of his shares signed to two of NMC’s top investors in 2017, while some of his other stock had been pledged as security against loans.