The exchange rate of this country has plummeted and inflation is high, shipping companies charge cancellation fees for bookings, beware of customers rejecting the goods

Recently, the three major markets of Turkey's stock market, national debt, and exchange rate have been turbulent, which has aroused global market attention.

In the early morning of March 22, local time, the Turkish lira plummeted. On the same day, the exchange rate of the Turkish lira against the US dollar fell from 7.2 to 8.4 to 1, and the Turkish lira plunged by 17% against the US dollar. Later, the lira appreciated slightly. As of 4:00 a.m. local time, the exchange rate of the lira to the US dollar was 8.06 to 1. The US dollar appreciated 11.7% against the lira in just 4 hours.

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On the same day, the price of Turkish government bonds also fell sharply, and the 10-year government bond yield soared by more than 22%, the largest increase in history.

▍Turkish monetary policy worries the market

For a long time, Turkey has not only been one of the fastest growing economies in the world, but also considered one of the developing countries closest to the level of developed countries. Even under the impact of the epidemic, Turkey's GDP in 2020 has achieved a growth of 1.8%.

Economic growth relies on large amounts of funds. In order to develop its economy, Turkey has borrowed heavily and implemented preferential tax policies that encourage the inflow of foreign capital. This has resulted in the Turkish government and the private sector being highly dependent on foreign capital.

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△As of the end of September last year, the total foreign debt announced by the Turkish Ministry of Finance reached US$435.1 billion
However, a large amount of foreign capital has not entered the real economy, but has flowed into consumption, infrastructure and other fields, with low efficiency and prominent problems of excessive debt.

As of September 2020, Turkey’s total foreign debt exceeded US$400 billion, accounting for nearly 60% of GDP. At the same time, Turkey’s central bank’s foreign exchange reserves have fallen below US$26 billion. Insufficient foreign exchange reserves have put into question the solvency of its foreign debts, and it has also frustrated its initiative in the exchange rate of the local currency.

In order to continue to attract foreign investment to develop its economy, Turkey has to maintain high interest rates. The governor of the central bank who advocated interest rate hikes was removed, the market's fear of interest rate cuts intensified, and capital chose to flee.

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In addition, Turkey has also implemented a loose monetary policy. The money supply has grown at an annual rate of 16%. Large-scale water releases have led to soaring prices and inflation. Data show that Turkey's inflation rate in February this year has exceeded 15%.

The high inflation rate, the high dependence on foreign capital and the negative impact of fiscal deficits on the economy have become increasingly prominent, which eventually made Turkey’s monetary policy fall into a passive state.

When a country's currency depreciates sharply, the cost of imports will increase accordingly. At present, the Turkish lira is so low that it is hard to say that Turkish importers can't handle it. In this case, some Turkish merchants may choose to suspend the transaction, or even suspend the payment of the balance, and refuse to accept the goods.

It is particularly important to note that the Turkish customs has a strange rule that if the goods are returned to the port, the consignee must agree in writing and show a "rejection notice". The goods will become Turkish assets after entering the Turkish port. For long-term stay in the port Or the goods that no one has picked up, the customs will treat it as no owner and have the right to auction the goods. At this time, the original importer is the first purchaser.

Certain regulations of the Turkish customs have been used by unscrupulous domestic buyers for many years. If exporters are not cautious, they will be in a very passive position. Therefore, when exporting to Turkey in the near future, please pay attention to the security of the payment!

▍Hapag-Lloyd: Turkey charges a cancellation fee
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We would like to inform you that from April 1, 2021, Hapag-Lloyd will update the Turkish booking cancellation fee:

Cancel the booking within 3 working days before the FCL is cut off, at a cost of USD 200 per box.

Cancel the booking within 7 working days before the FCL is cut off, at a cost of USD 50 per box.

All goods that are delayed and not shipped will be charged a booking cancellation fee.