Since the beginning of the new year, the currencies of several emerging market countries such as Turkey, the Philippines, Lebanon, and Nigeria have continued to fall, severely damaging market confidence. Foreign trade companies exporting to these countries, please be sure to pay attention to the risks of collection!
01 The Turkish lira continues to fall, and inflation hits a 19-year high
Since 2021, the Turkish lira has continued to depreciate against the US dollar, hitting new lows repeatedly. After entering 2022, the situation did not seem to improve. On January 6, the Turkish lira fell 1% against the US dollar, falling below 13.80.
According to a report by the Associated Press Ankara on January 3, official data released on Monday showed that Turkey’s annual inflation rate climbed at the fastest rate in 19 years, reaching 36.08% in December 2021. The Turkish Statistics Institute said that the consumer price index rose by 13.58% month-on-month in December, which further weakened people’s purchasing power. Data show that food prices have increased by 43.8% annually.
The report pointed out that Turkey’s annual inflation rate hit a new high since September 2002.
According to reports, under pressure from Turkish President Recep Tayyip Erdogan, the Turkish Central Bank lowered its key interest rate in September last year. Since then, Turkey’s inflation rate has continued to rise, and the Turkish lira has continued to fall to record lows.
The report also stated that the depreciation of the lira has made imported goods, fuel and daily necessities more expensive, and many of Turkey’s approximately 84 million people have difficulty affording food and other daily necessities. Many people have been buying foreign currencies and gold to protect their savings.
02 Philippine peso becomes worst-performing emerging Asian currency
The Philippine peso went from being the best-performing currency in December to the worst-performing emerging Asian currency as the seasonal boost from remittances faded.
Strategists believe the bearish momentum will continue.
Recently, the Philippine peso has fallen around 2%, erasing all the gains in the first three weeks of December that made the peso an outperformer in the region.
According to the “Philippine Star” report, since 2021, large business groups and listed companies in the Philippines have been continuously impacted by the epidemic, and many business giants have had to accept the new normal of struggling to survive for another year; overall economic activities such as retail, consumer spending, and mergers and acquisitions have Weak.
However, many people in the industry still have hope for economic recovery in 2022.
Ayala Group achieved net income of 19.4 billion pesos in the first three quarters of last year, a year-on-year increase of 70%, and most of its business operations have improved.
Ayala President and CEO Fernando Zobel de Ayala said that the continuously improving business environment reflects the adjustment of various organizations to adapt to the new normal of the epidemic for more than a year. He said that as the vaccination rate continues to increase, he hopes that the Philippine economy will further open up and the good momentum will continue.
03 The black market exchange rate of the Lebanese pound against the US dollar fell below 30,000 to 1, a drop of more than 95%.
According to Agence France-Presse, on the 4th local time, the black market exchange rate of Lebanon’s local currency “Lebanese pound” against the U.S. dollar fell below the integer mark of 30,000 to 1, setting another record low.
According to the black market exchange rate on the 4th, the monthly minimum wage of 675,000 Lebanese pounds set by the Lebanese government is only approximately 22.5 US dollars. If converted into RMB, it is approximately 143 yuan.
Lebanon has implemented a fixed exchange rate policy of pegging the Lebanese pound to the U.S. dollar since 1997, and the official exchange rate has been maintained at about 1,500 to 1. However, since the financial crisis in 2019, the black market exchange rate of the Lebanese pound against the US dollar has continued to fall. In the past two years, due to multiple political and economic factors, the exchange rate of the Lebanese pound against the US dollar has fallen by more than 95%.
04 Nigeria’s naira exchange rate falls to record low
“Bloomberg” reported that the Nigerian currency fell to a record low in the spot market.
As of 2:46 pm on December 31, 2021, the naira, which is managed by the Central Bank of Nigeria, fell 2.2% against the US dollar to reach a record 424.27. This is the biggest drop in the official exchange rate since February 23, 2021.
The naira has weakened every year since 2012. Since early October 2021, the Central Bank of Nigeria has been selling U.S. dollars to investors at a price of between 437 and 444 naira per dollar.
Nigeria’s central bank has devalued the naira three times since March 2020 as falling oil revenues put pressure on the country’s foreign exchange reserves. Analysts said that the naira spot exchange rate continued to hover around the 411 level in 2021, and the exchange rate was overvalued by about 12%.
The International Monetary Fund and the World Bank have repeatedly called on the Central Bank of Nigeria to merge multiple exchange rates, but analysts believe that a year before the election, the central bank is unlikely to merge exchange rates, which is a huge political risk.
05 Sri Lanka’s foreign exchange depleted and many embassies abroad were closed
According to the African Business website, Sri Lanka will temporarily close its embassy in Abuja, the capital of Nigeria, the Consulate General in Frankfurt, Germany, and the Consulate General in Nicosia, Cyprus, starting from December 31, 2021. The relevant functions will be located in Nairobi and Berlin respectively. and embassies in Rome.
Sri Lanka’s Ministry of Foreign Affairs said in a statement that the restructuring was aimed at preserving the country’s much-needed foreign exchange reserves and minimizing expenditures.
Without new sources of external financing, the government will have difficulty meeting its external debt obligations in 2022 and 2023. Sri Lanka’s Ministry of Finance also stated in a statement that the purpose of the restructuring is to protect the country’s much-needed foreign exchange.equipment and minimize maintenance-related expenditures at Sri Lanka’s overseas missions.
Due to the outbreak of the epidemic, this island country that relies on tourism has suffered huge losses-its income has been greatly reduced and its foreign exchange reserves have been almost depleted.
In March 2020, the government imposed a broad import ban to shore up foreign exchange reserves, but it triggered shortages of essential commodities such as fuel and sugar, causing prices to rise. Earlier, Fitch Ratings downgraded Sri Lanka’s long-term foreign currency issuer default rating to ‘CC’ from ‘CCC’.
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