U.S. sanctions hit a vulnerable economy

  • However, indirect impacts, such as TRY evolution, debt rollover and payment behavior, would have wider consequences. The recent monetary policy easing was quite ahead of the curve and the TRY has already weakened (-5% in October to a 6-months low).
  • Turkey's economy is not immune to a new shock. Though it has already exited from the deep recession experienced in H218, triggered by a sizeable exchange rate shock (-50% exchange rate depreciation, with a trough experienced in August 2018), GDP growth remains subdued (-0.2% in 2019 and +2.3% in 2020). It should recover to its pre-crisis level only in 2021.
  • The materialization of sanctions from Europe would be the true game-changer, as the main Turkish foreign exposures are with Europe (trade, financial). But Europe's exposure to the Turkish economy is significant, making harsh sanctions (financial sanctions) unlikely.

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Stéphane Colliac
Euler Hermes
Manfred Stamer
Allianz Trade