Turkey’s CDS scores expected to drop further

A value used to determine the non-repayment risk of a loan for which a credit risk premium is received and to insure the loan against this risk.

of Greece short term While the 1-year USD CDS score is 25.23, it is applied as 331.30 for Turkey. of Greece medium term While the 5-year USD CDS score is 92.63, Turkey’s is 487.15.

Economist Prof. Dr. Mahmut Demirbaş stated that Turkey has no short and medium-term default risk, using economic data and the current CDS (kredi risk premium) He expressed with examples that his scores should decrease even more.

According to Mahmut Demirbaş, Turkey has an inflation problem, but this problem alone is not a factor in raising the CDS score.

Demirbaş, comparing Turkey’s economic data with Greece, said that he did not find it correct that Turkey’s CDS scores, which are in a much better condition than Greece’s, are high.

Comparison of economic data of Turkey and Greece:

• Greece’s public debt to GDP ratio is 193 percent, while Turkey’s public debt to GDP ratio is 42 percent.

• While the ratio of public expenditures to GDP is 56.9 percent in Greece, it is 43.6 percent in Turkey.

• While the budget deficit rate is 7.4 percent in Greece, it is 4.79 percent in Turkey.

• While the ratio of household debt to GDP is 51.9 percent in Greece, it is 12.5 percent in Turkey.

• Greece’s population is 10.7 million people and the unemployment rate is 11.6 percent in Greece, while Turkey’s population is 84.6 million people and the unemployment rate is 10.2 percent.

• While the annual growth rate in Greece was 2.8 percent, it was 3.9 percent in Turkey.

• While the reserve amount of Greece excluding gold is 3 billion 236 million dollars (Greece is one of Turkey’s 7.9th in terms of population. If we consider the same amount, Turkey’s reserves should be 25 564.4 billion dollars), while Turkey’s reserve amount excluding gold is gold. 84 billion 810 million dollars.

• While Greece has 114.21 tons of gold reserves, Turkey has 488.87 tons of gold reserves (worth 43 billion 954 million dollars).

• Greece’s budget deficit minus 7.4 percent, Turkey’s budget deficit as of the 11-month period of 2022 (20 billion 400 million TL (Budget Deficit) / 4 trillion 258 billion 168 million TL (GDP) = 0.00479= 4 per thousand .79) at a rate of 4.79 per thousand.

• Moreover, while the ratio of Greek household debt to GDP is 51.9 percent, Turkey’s household debt to GDP ratio is 12.5 percent.

“There is no short-term or medium-term default risk in Turkey”

According to Economist Demirbaş, in an economic environment with such a budget deficit and household borrowing rate, there can be no short-term or medium-term default risk in Turkey.

“Grain Corridor success”

Fixture, He stated that Turkey’s peaceful stance in the Ukraine-Russian war and therefore its international success in the grain corridor, as well as its humanitarian contribution to the prisoner exchange, is an inconspicuous case, and that it successfully carries out these agreements with the United Nations.

“Turkey is the most important country in Europe’s supply security with its natural gas pipeline”

Demirbaş continued his assessment on this issue as follows:

“Turkey is richer than Greece in terms of mineral and energy resources, it is the most important country in Europe’s supply security, which acts as a bridge with 7 natural gas pipelines due to its geographical structure.

So, how is it that Turkey, which connects Europe to Asia with highway and railway lines, has CDS scores above Greece?

Short-term Greece’s 1-year USD CDS score is 25.23, Turkey’s 331.30 (after the 7.77 percent decline dated 15.12.2022), medium-term Greece’s 5-year CDS CDS score is 92.63, Turkey’s ‘s 487.15 (after the 5.37 percent decrease on 15.12.2022.) There is something wrong with these scores.

These CDS scores are unacceptable

Turkey has no risk of default or default. In such an environment, these CDS scores are unacceptable as long as economic data exists as above.

Yes. Turkey has an inflation problem. This problem does not affect the probability of default and does not create a loss for the lenders. Inflation is the most important problem of the whole world, especially in 2022. As part of the fight against inflation, in the December meetings, the US Federal Reserve (Fed) increased the policy rate to the 4.50 percent band with an increase of 50 basis points, the ECB increased the policy rate to 2.50 percent with an increase of 50 basis points, and the BoE increased the policy rate to 3.5 percent with an increase of 50 basis points. . It is also stated by three institutions that tightening policies will continue within the scope of the fight against inflation.

According to Demirbaş, these evaluationsConsequently, the inflation rate alone is not a factor that determines the CDS score.