By Jonathan Spicer, Orhan Coskun and Nevzat Devranoglu
ISTANBUL (Reuters) – The shock departure of Turkey’s top two economic policymakers at the weekend sets the stage for an interest rate hike and other moves to halt a record slide in the lira, analysts said, even as political questions hang over the leadership overhaul.
With no explanation from President Tayyip Erdogan’s government, his son-in-law Berat Albayrak said on Instagram late on Sunday he was stepping down as finance minister after two years for health reasons.
That came after an official notice in the early hours of Saturday that Erdogan had replaced the central bank chief Murat Uysal with a former finance minister. No reason was given for the move, though officials said the currency depreciation was to blame.
The lira jumped as much as 4% against the dollar on Monday, its biggest intraday rally in several months. As recently as Friday it touched a new all-time low after shedding 30% this year, the worst-performing emerging market currency so far in 2020.
The plunge has been driven by concerns over the central bank’s depleted foreign reserves, costly state interventions in foreign exchange markets, negative real rates and the risk of Western sanctions over Turkish foreign and defence policies.
Both Erdogan and Albayrak have also publicly urged lower rates – raising further concerns about the central bank’s policy independence. Last month it bucked broad expectations for a sharp policy tightening and held its key rate steady at 10.25%.
On Monday the new governor, Naci Agbal, said the central bank would focus on lowering high inflation and decisively use all policy tools in a statement that one currency trader described as “market-friendly”.
“Agbal has the power and closeness to go and convey the situation directly to the president,” said a senior official in Erdogan’s AK Party. “It is a difficult post, but steps to stop the rapid rise in the exchange rate must be taken.”
But Win Thin, global head of currency strategy at Brown Brothers Harriman, said “Turkish political risk jumped over the weekend,” citing Albayrak’s resignation statement.
“The reason given was health reasons, but there is obviously more to this than meets the eye,” the New York-based analyst said.
ECONOMIC STRAIN
Early on Monday, sources at the presidency finally confirmed Albayrak’s statement, about 15 hours after he took the unusual step of announcing on Instagram that he was leaving government. A Finance Ministry official had earlier confirmed its authenticity. Erdogan would need to approve the resignation.
Turkey, the largest economy in the Middle East, has been hit by two sharp contractions in as many years and its currency has shed some 45% since Albayrak took the reins in mid-2018.
Though economic growth is recovering from the coronavirus fallout, inflation is stuck around 12% and unemployment is high, especially among youth, and is expected to jump again when a ban on layoffs is lifted.
Turkish state banks have sold an estimated $100 billion in dollar reserves this year to support the beleaguered lira but government data shows such interventions have cooled in recent months, with analysts expecting them to ease further under the new leadership.
Economists and opposition politicians have criticised the interventions for exacerbating a sharp drop in the central bank’s net foreign exchange buffer, which has more than halved this year, and for propelling a record rise in Turks’ hard currency holdings.
Analysts at Goldman Sachs and TD Bank expect Agbal, a close ally of Erdogan, to raise the key interest rate by at least 600 basis points as soon as a policy meeting on Nov. 19.
“Many now expect Agbal to quickly hike rates aggressively to stabilize the lira, as he probably would not have taken the post without freedom to pursue orthodox policies,” Brown Brothers Harriman’s Thin added.
(Reporting by Jonathan Spicer, Orhan Coskun and Nevzat Devranoglu; Editing by Ana Nicolaci da Costa)
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
