Emerging Markets Daily - January 18
Erdogan Signals Slower Rate Cuts, Oil Prices Hit 7 Year High, Blinken's Ukraine Shuttle Diplomacy, Nazarbayev Resurfaces, Indonesia's New Capital City
The Top 5 Stories Shaping Emerging Markets from Global Media - January 18
Erdogan Signals Slower Rate Cuts and ‘Our Brightest Year’
Bloomberg
“Turkey’s President Recep Tayyip Erdogan said borrowing costs will fall slowly and gradually, pulling back from previous exhortations to cut quickly, in a shift of tone before the central bank’s interest rate meeting later this week.”
“‘The exchange rate, the interest rate, will fall slowly, gradually and without hurry’ to make 2022 ‘our brightest year,’ state-run Anadolu Agency on Tuesday cited Erdogan telling a group of reporters on his way back from Albania. Erdogan’s statements echoed those of Treasury and Finance Minister Nureddin Nebati, who told Bloomberg last week that officials would like to see how the economy develops in the first quarter.”
“The central bank has cut its policy interest rate by 500 basis points to 14% since September and put easing on pause until the end of March to assess the outcome of its monetary stimulus. The central bank rate-setting meeting is scheduled for Jan. 20, and Erdogan’s remarks appear to be confirming that borrowing costs will be kept on hold. “
“Erdogan said the lira has stabilized following government measures on Dec. 20 that included the introduction of guaranteed returns on lira deposits.”
“The lira lost almost half of its value against the dollar in 2021 to become the worst-performing major currency, mainly because of the interest rate cuts. Its depreciation accelerated inflation that hit 36% in December, the highest level in nearly two decades.”
“‘Inflation is on the decline, will be on the decline, that’s for sure,’ said Erdogan, who believes an unconventional economic theory that low rates curb consumer prices.” Firat Kozok reports.
Oil Prices Hit Seven Year High on Rising Geopolitical Tensions
Wall Street Journal
“Crude prices rose to their highest level since the 2014 shale-induced oil crash, a milestone in a rally that is gathering momentum as geopolitical tensions threaten to knock supply.”
“Futures for West Texas Intermediate, the main grade of U.S. crude, added 1.7% to $85.20 a barrel Tuesday morning. If the contracts settle above $84.65 a barrel, it will mark their highest closing level since October 2014, when oil prices were moving in the opposite direction as a gusher of U.S. crude flooded the market.”
“It took the oil market several years to recover from the price decline set in motion by America’s re-emergence as an oil-producing superpower. The rebound from the coronavirus crash of 2020—when U.S. crude futures turned negative as the world struggled to find places to store oil—has been much faster.”
“Among the factors driving the rally are concerns that tensions in the Middle East and Europe will spill into energy markets by denting supplies from major crude producers, particularly Russia and the United Arab Emirates. Any outages are likely to goose prices in a market where demand is rising and stockpiles have fallen below recent norms, traders and analysts say.” Joe Wallace reports.
Blinken to Visit Berlin and Kyiv to Ease Russia-Ukraine Tensions
Financial Times
“US secretary of state Antony Blinken will travel to Kyiv and Berlin this week as the White House continues to seek an end to tensions over Ukraine amid threats of a renewed Russian invasion.”
“Blinken will meet Ukraine’s president Volodymyr Zelensky on Wednesday, and foreign ministers from France, Germany, and the UK a day later, the US state department said on Tuesday.”
“The hastily arranged trip comes after talks last week on Russia’s security demands with the US and Nato reached a ‘dead end’. The White House warned on Friday that Russia had planted operatives for a ‘false-flag’ operation that could be used as a pretext for open aggression against Ukraine.”
“Vladimir Putin, Russia’s president, denies he is planning to use force against Ukraine but has massed troops at the border and threatened an unspecified ‘military-technical response’ if the US and Nato do not meet Moscow’s demands that the transatlantic military alliance roll back its forces and pledge never to admit Ukraine.”
“After the EU was sidelined from last week’s talks, France and Germany are seeking to revive the four-person Normandy format talks with Russia and Ukraine on the stalled peace process in the Donbas.” The FT reports.
Nazarbayev Appears for First Time Since Kazakhstan Unrest
Bne Intellinews
“Kazakhstan’s former president Nursultan Nazarbayev on January 18 appeared for the first time since unrest plunged the country into turmoil at the start of the new year.”
“Heavy speculation that the 81-year-old was dead emerged as authorities refused to confirm or deny whether he was alive, while at the same time the Tokayev administration proceeded with an apparent purge of members of the Nazarbayev clan from positions in power and business.”
“Nazarbayev gave an address in a four-minute-long video, apparently shot in the capital Nur-Sultan, released on social media. The ex-president, who ruled for nearly three decades from 1990 to 2019 before handing over to Kassym-Jomart Tokayev, and who has the honorific title of ‘Elbasy’, or ‘Leader of the Nation’, referred to himself as a ‘pensioner’ and said in the video: ‘The January events shocked the whole of Kazakhstan.’”
“Nazarbayev, who was abruptly dismissed from his post as head of the national security council as Tokayev sought to end the mayhem and assert his authority, also addressed the question of his prolonged absence from public view by claiming that he did not consider it necessary to interfere in the situation or even appear in public as the presidency was handed to successor Tokayev in 2019.”
“But prior to recent events, Kazakhs widely viewed Nazarbayev as exercising commanding power from behind the scenes despite his official retirement from the presidency. Many analysts saw Tokayev as simply his handpicked placeman but by stripping the security council post away from Nazarbayev in the way he did, Tokayev was able to quell some of the anger being expressed on the street—to very many among the crowds, Nazarbayev remained the main target for their frustration at the perceived establishment corruption and social injustice seen in the country given that these things arose under his long reign—and indicate that a true post-Nazarbayev era was now arriving.” Nizam Khodjayev reports.
Indonesia Names New Capital ‘Nusantara’ as Parliament Approves Shift
(Photo of Jakarta Above)
Nikkei Asia
“Indonesia's new capital city is set to be called 'Nusantara,' with the country's House of Representatives on Tuesday passing a law to shift the government from Jakarta to a site on the island of Borneo.”
“According to the latest draft, seen by Nikkei Asia, the law stipulates the name Nusantara, an Indonesian word commonly used to refer to the entire archipelago nation. National Development Planning Minister Suharso Monoarfa said President Joko Widodo proposed the name.”
“The new capital will be in East Kalimantan Province on Borneo, some 2,000 km northeast of Jakarta, the current capital on the island of Java which will remain the country's financial and commercial center. Nusantara will have a provincial-level administration -- on par with Indonesia's 34 provinces.”
“The law says foreign embassies and representatives of international organizations are expected to join state agencies in shifting their offices to the new capital within 10 years of the relocation starting, with the government providing land.”
“Widodo announced plans to relocate the capital shortly after starting his second term in office in late 2019, citing Jakarta's chronic traffic, pollution, overcrowding and coastal flooding problems, as well as the need for a new economic driver away from Java. But the COVID-19 pandemic had pushed the scheme onto the back burner.” Nikkei Asia reports.
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