ISTANBUL: Turkish inflation surged to nearly 25 percent in September from a year earlier, official data showed on Wednesday, hitting its highest in 15 years and sharpening focus on whether the central bank will be able to deliver another hefty rate hike.
The size of the increase — prices jumped by 6.3 percent from a month earlier — far outpaced expectations and underscored the deep impact of a currency crisis on the economy and consumers.
The lira has lost nearly 40 percent of its value this year against the dollar, hit by concerns about President Tayyip Erdogan’s influence over the central bank and a rift with Washington.
That sell-off has pushed up prices of everything from food to fuel and eroded confidence in what was once a high-flying emerging market.
“The central bank will need to react to this,” said Inan Demir, senior emerging markets economist at Nomura. “This is not something that could be ignored and they will have to hike at their next meeting.”
The lira weakened slightly after the release of the data and was at 6.0500 to the US dollar, about 1 percent weaker on the day, at 0748 GMT. It has been underpinned in recent weeks by the central bank’s massive September rate hike and hopes for an improvement in ties with the United States, particularly over the fate of a jailed American pastor.
Inflation rose to 24.52 percent in September from a year earlier, the data from the Turkish Statistical Institute showed. In August the year-on-year figure was 17.9 percent.
The month-on-month jump of 6.3 percent outstripped the 3.6 percent forecast in a Reuters poll of 15 economists.
The central bank last month raised interest rates by 6.25 percentage points to put a floor under a lira and try to rein in inflation. Erdogan, a self-described “enemy of interest rates,” has repeatedly called for lower rates to keep cheaper credit flowing, particularly to the construction industry.
Following the last rate hike, Erdogan said his patience with interest rates had limits. Such comments have undermined confidence in the central bank’s independence and triggered the currency sell-off in the first place.
Not all economists agreed the central bank would increase rates at its next meeting this month.
“Given the scale of last month’s rate hike and continued pressure from President Erdogan for rates not to be raised further, we think that policy will be left on hold,” said Jason Tuvey of Capital Economics in a note, adding inflation likely had a “bit further” to rise in the coming months.
Food and non-alcoholic drinks prices, key to consumer price inflation, surged 6.4 percent month-on-month. Furnishing and household equipment posted the highest monthly increase at 11.41 percent, followed by transportation at 9.15 percent, the data showed.
Producer prices rose 10.88 percent month-on-month in September for an annual rise of 46.15 percent, the data showed.
Financial markets have long been concerned about Erdogan’s control over monetary policy, which they say has undermined the central bank’s ability to fight inflation.
In a decade and a half in power, Erdogan and his government have built bridges, power plants and hospitals and improved the lives of millions of lower-income, pious Turks.
But economists say the boom years focused more on consumption rather than productivity — that Turkey built shopping malls when it should have been investing more in factories and education.
The lira sell-off has put focus on problems in the real economy and the potential for a crisis at Turkey’s banks.
For years Turkish companies have loaded up on cheap euro and dollar loans. But the lira crisis has driven up the cost of servicing that debt, meaning lenders face a wave of defaults.
“The currency has appreciated and the central bank has hiked rates aggressively, so going forward, toward the end of the year, inflation numbers should stabilize,” said Bernd Berg, a global macro and foreign exchange strategist at Woodman Asset Management in Zurich.
“To me the worst of currency crisis is over and we should see some stabilization.”
Analysts have said that the next important event for the lira will be the trial of the US evangelical Christian Pastor Andrew Brunson.
Brunson is charged with links to Kurdish militants and supporters of Fethullah Gulen, the cleric blamed by Turkey for a failed coup attempt in 2016. He has denied the accusation, as has Gulen, and Washington has demanded his immediate release.
The diplomatic rift — and US President Donald Trump’s doubling of steel tariffs in response to Brunson’s detention — has added to the pain for the lira.
Brunson’s lawyer said he filed an appeal for his client’s release from house arrest on Wednesday.
The pastor is next due in court on Oct. 12.
Turkey inflation surges to nearly 25%, highest in 15 years
Turkey inflation surges to nearly 25%, highest in 15 years
- September inflation shows biggest annual spike in 15 years
- Inflation put focus on next central bank meeting
Riyad Bank issues SR-denominated Tier 1 sukuk
RIYADH: Riyad Bank has commenced the issuance of its additional Tier 1 sukuk under its SR10 billion ($2.66 billion) Additional Tier 1 Capital Sukuk Program via a private placement in the Kingdom.
In a statement to Tadawul, the lender, one of the largest financial institutions in Saudi Arabia, said that the terms of the offer and the value of the sukuk would be determined based on market conditions.
The financial institution added that the offering, which commenced on Jan. 7, will run through Jan. 16, with a minimum subscription limit of SR250,000.
Sukuk, also known as an Islamic bond, is a Shariah-compliant debt product through which investors gain partial ownership of an issuer’s assets until maturity.
According to the statement, the bank has mandated Riyad Capital as the sole lead manager in relation to the offer and issuance of the sukuk.
The financial institution added that it will announce any other relevant material developments in due course.
The steady issuance of sukuk happening in the Kingdom falls in line with the views shared by Fitch Ratings in a report in October, which said that the distribution of these Islamic bonds is expected to grow in 2025, driven by US Federal Reserve rate cuts.
According to Fitch, interest rates are expected to be at 3.5 percent in 2025, resulting in a boost in sukuk issuances in the short term.
In December, Fitch Ratings affirmed Riyad Bank’s long-term issuer default rating at A- with a stable outlook.
The US-based agency said that the A- rating of the financial institution is attributed to the support it receives from Saudi Arabia’s government.
The report added that Saudi authorities’ strong ability and willingness to support domestic banks irrespective of size, franchise, funding structure, and level of government ownership also played a crucial role in the strong rating of Riyad Bank.
According to Fitch, an A- rating denotes expectations of low default risk and a strong ability to pay financial commitments.
In October, Riyad Bank announced that its net profit for the first nine months of 2024 reached SR7.06 billion, representing a rise of 16 percent compared to the same period of the previous year.
In December, an analysis by Kamco Invest projected that Saudi Arabia is expected to witness the greatest share of bond and sukuk maturities in the Gulf Cooperation Council region from 2025 to 2029 to reach $168 billion.
Oil Updates — prices dip as demand optimism fades
BEIJING/SINGAPORE: Oil prices eased on Tuesday, extending losses into a second consecutive session after last week’s rally, although concerns about tighter Russian and Iranian supply amid widening Western sanctions checked losses, according to Reuters.
Brent futures edged down 8 cents, or 0.1 percent, to $76.22 a barrel by 07:52 a.m. Saudi time, while US West Texas Intermediate crude fell 15 cents, or 0.19 percent, to $73.42.
Both benchmarks slid on Monday, after rising for five days in a row last week to settle at their highest levels since October on Friday amid expectations of more fiscal stimulus to revitalize China’s faltering economy.
“This week’s weakness is likely due to a technical correction, as traders react to softer economic data globally that undermines the optimism seen earlier,” said Priyanka Sachdeva, senior market analyst at Phillip Nova, referring to bearish economic news from the US and Germany.
Also dragging on oil prices is the rising supply from non-OPEC countries that, coupled with weak demand from China, is expected to keep the oil market well supplied this year.
Market participants are waiting for more data this week, such as the US December nonfarm payrolls report on Friday, for clues on US interest rate policy and oil demand outlook.
“The move higher in crude oil prices appears to be running out of momentum,” ING analysts wrote in a note.
“While there has been some tightening in the physical market, fundamentals through 2025 are still set to be comfortable, which should cap the upside.”
Worries over tightening Russian and Iranian supply amid sanctions, however, kept a floor under oil prices.
The uncertainty has translated into better demand for Middle Eastern oil, reflected in a hike in Saudi Arabia’s February oil prices to Asia, the first such increase in three months.
Money managers raised their net long US crude futures and options positions in the week to Dec. 31, the US Commodity Futures Trading Commission said on Monday.
Saudi Arabia issues $12bn three-part bond: NDMC
CAIRO: Saudi Arabia issued a $12 billion three-tranche bond, selling $5 billion, $3 billion and $4 billion in tenors of three, six and 10 years respectively, the National Debt Management Center said on Tuesday.
The total order book reached around $37 billion, equalling an over-subscription of three times the issuance, NDMC said in a statement.
The transaction is part of NDMC’s strategy to diversify the investor base and meet the Kingdom’s financing needs, it added.
Lucid beats estimates for EV deliveries as price cuts, cheaper financing spur demand
- Company handed over 3,099 vehicles in the fourth quarter ended Dec. 31
- For 2024, production rose 7% to 9,029 vehicles, topping Lucid’s target of 9,000 vehicles
LONDON: Lucid Group beat expectations for quarterly deliveries on Monday, as the Saudi Arabia-backed maker of luxury electric vehicles lowered prices and offered cheaper financing to drive demand, sending its shares up more than 6 percent.
The company handed over 3,099 vehicles in the fourth quarter ended Dec. 31, compared with estimates of 2,637, according to six analysts polled by Visible Alpha. That represented growth of 11 percent over the third quarter and 78 percent higher than the fourth quarter a year earlier.
Production rose about 42 percent to 3,386 vehicles in the reported quarter from a year earlier, surpassing estimates of 2,904 units.
For 2024, production rose 7 percent to 9,029 vehicles, topping the company’s target of 9,000 vehicles. Annual deliveries grew 71 percent to 10,241 vehicles.
Lucid, backed by Saudi Arabia’s sovereign wealth fund, started taking orders for its Gravity SUV in November, in a bid to enter the lucrative SUV sector and take some market share from Rivian and Tesla.
Rivian on Friday topped analysts’ estimates for quarterly deliveries and said its production was no longer constrained by a component shortage. But Tesla reported its first fall in yearly deliveries, in part due to the company’s aging lineup.
Demand for EVs, already squeezed by competition from hybrid vehicles, could face another challenge as President-elect Donald Trump is expected to reverse many of the Biden administration’s EV-friendly policies and incentives.
The company also raised $1.75 billion in October through a stock sale that CEO Peter Rawlinson believes will provide Lucid with a “cash runway well into 2026.”
Lucid, whose stock was down about 28 percent in 2024, is scheduled to report its fourth-quarter results on Feb. 25.
Saudi Arabia’s PIF completes $7bn inaugural murabaha credit facility
- Shariah-compliant financing is backed by a syndicate of 20 international and regional financial institutions
- Facility builds on PIF’s recent success with sukuk issuances over the past two years
RIYADH: The Saudi Public Investment Fund has closed its first Murabaha credit facility, securing $7 billion in funding. This is a key step in the fund's plan to raise capital over the next several years.
The Shariah-compliant financing is backed by a syndicate of 20 international and regional financial institutions, according to a press release.
A murabaha credit facility is a financing structure compliant with Islamic principles, where the lender purchases an asset and sells it to the borrower at an agreed profit margin, allowing repayment in installments. This structure avoids interest, adhering to Shariah laws.
“This inaugural murabaha credit facility demonstrates the flexibility and depth of PIF’s financing strategy and use of diversified funding sources, as we continue to drive transformative investments, globally and in Saudi Arabia,” said Fahad Al-Saif, PIF’s head of the Global Capital Finance Division and head of Investment Strategy and Economic Insights Division.
The facility builds on PIF’s recent success with sukuk issuances over the past two years, further bolstering its financial strength and commitment to best practices in debt management.
Rated Aa3 by Moody’s and A+ by Fitch, both with stable outlooks, PIF continues to solidify its position as a global financial powerhouse.
The fund’s capital structure is supported by four main funding sources, including contributions from the Saudi government, asset transfers, retained investment earnings, and financing through loans and debt instruments.
PIF’s strategy focuses on financing initiatives that contribute to economic growth in Saudi Arabia and internationally.
The $7 billion murabaha credit facility is expected to bolster PIF’s liquidity, supporting its investments both locally and globally.
By diversifying its funding sources through a Shariah-compliant structure, PIF looks to enhance its financial partnerships while complementing its existing financing tools, such as sukuk issuances.
This aligns with its medium-term capital strategy, ensuring flexibility, competitive financing terms, and risk mitigation.
Earlier in January, the National Debt Management Center also secured a Shariah-compliant revolving credit facility worth SR9.4 billion ($2.5 billion).
The three-year facility, supported by three regional and international financial institutions, is designed to meet the Kingdom’s general budgetary requirements.
Aligned with Saudi Arabia’s medium-term public debt strategy, the arrangement focuses on diversifying funding sources to meet financing needs at competitive terms.
It also adheres to robust risk management frameworks and the Kingdom’s approved annual borrowing plan.
PIF has been actively engaging in credit arrangements to support its investment initiatives and the Kingdom’s Vision 2030 economic diversification plan.
In August 2024, PIF secured a $15 billion revolving credit facility for general corporate purposes, replacing a similar facility agreed upon in 2021.
In addition to the revolving credit facility, PIF has diversified its financing instruments by issuing a $2 billion seven-year Islamic sukuk earlier in 2024 and planning to issue bonds in pounds sterling.
These efforts are part of PIF’s strategy to leverage a variety of funding sources to support its expansive investment activities.
