Loss greater than interest, less than exchange rate protection

For two days, we focused on the 9-month performance of financial investment instruments, the future of global markets and our stock market.

Today we continue with interest. Interest is the problem of almost the whole world these days. Central banks are taking measures against rising inflation by raising interest rates and by monetary tightening. One of the consequences of this is the risk of a slowdown in the economy, even recession and recession.

LEADERSHIP IN NEGATIVE INTEREST

➔ Interest rates are Turkey’s concern. But we have the opposite. Our problem stems from the record negative interest rates. Roughly, the inflation-interest difference breaks the world record with 70 points.

➔ Inflation reached 83.5 percent, the highest level since 1998. The policy rate of the Central Bank was reduced to 12%. The difference is 71.5 points. It is also expected to be reduced to single digits by 9 percent in the coming months.

➔ Deposit rates are at the level of 15.79 percent for the week ending August 23. The reduction of the rates to these levels did not occur in the free market, but was achieved by administrative measures and by 200 regulations for the banking sector this year.

LOW INTEREST BUT NO LOAN

➔ Banks use the resources they collect from the Central Bank from 12 percent and from depositors from 15.79 percent in the form of commercial loans with 21 percent interest after intermediation costs and taxes.

➔ At a time when producer prices are over 150 percent, using credit with 21 percent means a nearly free resource for companies. Naturally, everyone is after credit.

➔ However, there is not much credit. because The government imposed limits on total credit increases. It provides loans against invoices and limited the increase in total loans by not exceeding 10 percent until the end of 2022.

➔ This means For many companies and sectors, forget the use of credit, it means roasting with your own oil. However, there is not much oil. Among them are exporters who provide foreign exchange liquidity to the economy.

ELECTRICITY CONSUMPTION DROPPED 3.1%

➔ Naturally, the economy started to slow down with the restriction of credits. Although 7.6 percent growth was achieved in the first half of the year, things did not go well in the third quarter.

➔ One of the best leading indicators of this is the decrease in electricity use. Dr. Orhan KaracaAs can be seen from the graph prepared by In the third quarter of the year, electricity consumption decreased by 3.1 percent.

➔ If we look at what consumption was before, the growth was 11.4 percent compared to the 12.2 percent increase last year. In the first quarter of this year, the consumption increase of 5 percent was followed by a growth of 7.5 percent.

➔ In the second quarter, this correlation was surprising. While electricity consumption decreased to 1.4 percent, the growth increased to 7.6 percent. Orhan Karaca estimates that this situation may be caused by a calculation error due to high inflation.

➔ Despite the restrictions imposed on the use of loans in market conditions, the use of loans originating from the Central Bank, which started with 150 billion liras of 9 percent interest for foreign exchange earning investments, is in effect. A new package is being prepared within the framework of the Credit Guarantee Fund.

➔ State in a nutshellI determine the amount and interest of the loan to be given. I give credit to what I want, I don’t to what I don’t want” says.

➔ Under these circumstances, it can be expected that credit conditions will be tighter in the last quarter of the year.

35% REAL LOSS IN 1 YEAR

➔ If you ask about deposit interest under these conditions, In real terms, it may have fallen to one of its historical lows.

➔ In previous years, savers did not have any real income from TL deposits. But in comparison with inflation, the losses were bearable and limited.

In the last year, the real loss has reached a very high level with 35 percent. Victory RisesAccording to the series followed by , there is no real return on deposits after October 2019. It’s been missing for three years.

➔ In September of last year, one-year deposit interest was 19.12 percent. The expected inflation for the next year was 12.94 percent at that time. The real interest rate to be obtained under these conditions was 5.47 percent.

➔ However, on September 23, 2021, the Central Bank began to reduce interest rates. Those who thought that inflation would explode and the government wanted to raise the rate rushed into foreign exchange and real estate.

➔ In September 2022, inflation increased to 83.45 percent, depositors suffered a great mistake and loss. While they expected a real gain of 5.47 percent, they were left alone with a loss of 35.07 percent.

➔ During this process, those who continued to keep their money in TL, those who had to keep it, and a large group of people who were unaware of the situation and were not financially literate, lost a similar amount, albeit in different terms.

9% DAMAGE FROM CURRENCY PROTECTION

➔ After seeing this table, people say that there is a currency-protected deposit application.

➔ Well, they were also crushed by inflation. They failed to make a real profit. In our table yesterday The dollar had a 9 percent real loss in 9 months against the CPI.

The loss in the euro is even greater with 21.4 percent. The loss of the currency basket consisting of half Euro and half dollar is 15.5 percent in real terms.

➔ So Currency-protected deposits only protect against exchange rate increases, but not when inflation exceeds the rate. We saw this in the 9-month implementation period.

➔ However, there is a huge difference. If the income from interest in TL deposits was 13.5% in 9 months, those who switched to currency-protected deposits in dollar terms received a 39% exchange rate difference. Those who switched to FX-protected deposits achieved a return of approximately 3 times the TL deposit interest in 9 months.

➔ Periods of rising inflation do not seem to be a good investment tool. Or we can call it inflation itself.