Turkey’s ‘unemployment’ rate rises to 10.8 percent

Lira hovers near firmest

ISTANBUL, Oct 15, (RTRS): Turkey’s unemployment rose 0.1 percent year-on-year in the June-August period and analysts expect the rate to increase in coming months due to a sharp slowdown in the economy.

Unemployment stood at 10.8 percent in the June-August period, compared to 10.2 percent in the May-July period, data from the Turkish Statistical Institute showed on Monday.

The government’s economic programme forecasts unemployment at 11.3 percent in 2018. Three economists calculated that would mean a rate of around 12.4 percent in the second half of the year with up to 700,000 people being laid off.

“It is clear we are on the brink of a serious unemployment surge,” Seyfettin Gursel, director at the Bahcesehir University Economic and Societal Research Centre (BETAM), told Reuters last week, adding that the government’s target would be a “completely imaginary goal” in the event of a sharp slowdown of the economy.

Turkey’s lira is currently down nearly 35 percent against the dollar this year on concerns over President Tayyip Erdogan’s grip on monetary policy. Inflation also hit a 15-year high in September to stand at 24.52 percent.

Faced with rising costs across the board due to surging consumer prices and volatile foreign exchange rates, many companies are laying off employees to curb losses.

Impact

Economists say the impact of such moves will be seen on unemployment figures in the coming months.

Non-agricultural unemployment stood at 12.9 percent on average during the June-August period, data from the statistics institute also showed, compared to 12.1 percent in the May-July period.

Turkey’s lira hovered near its firmest in two months against the dollar on Monday, following the release of an American evangelical pastor whose trial in Turkey had strained ties with NATO ally Washington.

With the release of Andrew Brunson already priced in - a court freed him on Friday after two years of detention and he returned to the United States over the weekend - traders said the lira would need a fresh impetus to strengthen further.

The lira has fallen 40 percent this year, sending inflation soaring to its highest in a decade and a half and deepening concern about the outlook for the real economy and banks.

“We have not seen a further firming in the lira since the market already priced in the outcome before Brunson’s trial,” a forex trader at a local bank said. “We have overcome a big risk but we might not see a swift downward trend in the lira/dollar rate due to ongoing risks,” the trader said.

The lira was at 5.8500 to the dollar at 0835 GMT, slightly weaker from its close on Friday, when it hit its firmest in two months at 5.8000. The main BIST 100 share index rose 1.23 percent while main banking index rose nearly 4 percent.

Finance Minister Berat Albayrak on Monday said inflation would enter a downward trend until the end of the year.

Traders have cited several concerns - including President Tayyip Erdogan’s control over monetary policy, the potential for a spike in bad debt at banks, and the possibility of an Iran sanctions-busting fine by the United States against state-run Halkbank - as potential risks.

Changed

Separately, data showed that unemployment was little changed in the June-August period, at 10.8 percent, from 10.2 percent in May-July.

The September budget showed a deficit of 6 billion lira ($1.03 billion), the Finance Ministry said on Monday.

Turkish President Tayyip Erdogan’s AK Party will push through parliament a law transferring to the treasury the main opposition party’s shares in Isbank, Turkey’s largest listed lender, Erdogan said on Saturday.

The Republican People’s Party (CHP) owns a 28 percent stake in Isbank, bequeathed to it by Mustafa Kemal Ataturk, founder of the Turkish Republic.

Erdogan made the comment after pro-government newspaper Sabah reported earlier on Saturday that AKP was in the process of drawing up a draft law facilitating the transfer.

“We as the AK Party will bring this issue to parliament. Thankfully the MHP said it will give its support,” Erdogan told a rally in central Turkey’s Kayseri province, referring to his party’s nationalist allies.

“God willing we will push this through parliament and secure the transfer of this stake to the Turkish Republic’s treasury,” he said.

The AK Party has 290 seats in parliament and along with the MHP’s 50 seats has a comfortable majority needed to pass legislation in the 600 seat assembly. The CHP has 144 seats.

Isbank shares opened 2.4 percent lower on Thursday after Erdogan’s comments in the media that the treasury should take over the CHP stake.

Erdogan has previously voiced concern about a political party controlling a large stake of a major bank and said authorities should look into CHP members serving on Isbank’s board.

Turkey is due to hold local elections in March next year.