The Turkish central bank is facing growing pressure to decisively hike interest rates at a meeting Thursday to defend an ailing currency and rein in double-digit inflation.  But concerns remain over President Recep Tayyip Erdogan’s grip on monetary policy.

The Turkish lira has fallen more than 40 percent, much of it in the past few weeks, fueling rampant inflation.  

”Just to keep up with the acceleration of inflation the central bank needs to hike by more than 400 basis points,” said chief economist Inan Demir of Nomura International, “This is only to keep up with the acceleration in inflation, since last formal hike.  If we consider the prospect of a further acceleration inflation outlook, perhaps more is needed [interest rate hikes],” he added.

Demir says what has accelerated heavy lira falls are investor concerns the central bank can’t act decisively because of Erdogan, who has sweeping executive powers.  He has repeatedly voiced opposition to high-interest rates, which he claims “enslaves poor people.”

In a statement, this month the central bank declared it was ready to alter monetary policy to rein in inflation.  Financial markets interpreted the comment as the bank preparing to hike rates aggressively.  “The statement suggests we will see some action,” Demir said, “but I am not very confident the policy response will be as large as the markets need.”

This week, Finance Minister Berat Albayrak sought to talk up the Turkish economy, claiming the financial system was already “correcting itself.”  

Albayrak is the president’s son in law and widely seen as having the inside track with  Erdogan.  Some analysts suggest Albayrak’s positive statements may be seeking to play down the need for a significant increase in interest rate.

Misjudging international investors expectations could be costly.  “There will be massive sell off to the point of a panic if they don’t raise rates enough,” said political analyst Atilla Yesilada of Global Source Partners, “the sky’s limit, there is no way to make a rational forecast on the exchange rate, because we really don’t know when it stops,” he added.

Analysts warn a further decline in the lira risks undermining the Turkish public’s faith in the currency will lead them to convert their savings into dollars, adding pressure to the currency and risking the economy falling into a vicious cycle.

“Lira weakness feeds into inflation,” Demir said, “insufficient action by the central bank leads to deposit dollarization, which feeds into lira weakness, and that feeds into inflation again.”

 

“Past experiences in Turkey show, a sharp slow down of the economy followed after sharp depreciation,” Demir said, “the GDP [Gross Domestic Product – the size of the economy] growth rate [has] dropped off by 11 to 13 percent, that is the big risk we are looking at for Turkey.”

International banks are forecasting the Turkish economy heading into recession next year.  The timing for Erdogan could not be worse.  In March, Turkey holds critical local elections for the country’s biggest cities, one of the few places where opposition parties still have the opportunity to exercise power.  Erdogan has made it a priority to win the March polls.

Erdogan is likely to be aware, with many of Turkey’s big companies heavily indebted, a further hike in interest rates also risks driving the economy further into recession.

 

But interest rate hikes on their own may not be enough to address investor concerns and restore stability to the currency.  “A package of reforms is needed,” Demir said.

The World Bank has warned Turkey to rein in massive state building projects it says are overheating the economy and stoking inflation. Investors are also calling for the central bank to be independent and free of political interference.  Analysts say Ankara will also need to repair relations with Washington.

August’s crash in the lira was triggered by the imposition of Turkish sanctions by U.S. President Donald Trump over the detention of American Pastor Andrew Brunson, who is on trial for terrorism charges that Washington claims are politically motivated.

“To stop inflation they [Turkish central bank] will need at least 500 basis points or possibly like Argentina 1,000 basis points interest rate hike,” analyst Yesilada said.

“But is the problem [currency weakness] lack of confidence in running the economy or Father Brunson,” he added.  “If it’s Brunson then raising rates will hurt the economy, but not do much to stabilize the currency.  So maybe it’s better to wait until Mr. Erdogan decides to end this crisis with the United States.”

For now, Erdogan appears to be ready to tough it out, insisting Brunson should stand trial and that lira weakness is part of an international conspiracy against Turkey.
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South Korea’s unemployment rate hit an eight-year high in August as mandatory minimum wages rose, adding to economic policy frustrations and political challenges for President Moon Jae-in whose approval rating is now at its lowest since inauguration.

The unemployment rate rose to 4.2 percent in August from 3.8 percent in July in seasonally adjusted terms as the number of unemployed rose by 134,000 people from a year earlier.

This was the labor market’s worst performance since January 2010, when the economy was still reeling from the global financial crisis, when 10,000 jobs were lost.

Finance Minister Kim Dong-yeon said on Wednesday the government will need to adjust its wage policies, signaling some future soft-pedaling in the drive to raise minimum wages.

“(The government) will discuss slowing the speed of minimum wage hikes with the ruling party and the presidential office,” Kim Dong-yeon told a policy meeting in Seoul, adding he did not expect a short-term recovery in the job market.

Experts say the uproar over jobs could also cost Moon considerable political capital as he pursues closer ties with Pyongyang, as any good news from an inter-Korean summit may not be enough to offset public discontent over the lack of jobs and soaring housing prices.

More than 60 percent of respondents in a Gallup Korea survey criticized Moon’s handling of the economy, including his ‘inability to improve the livelihoods of ordinary citizens’ and ‘minimum wage increases.’

The jobs report showed the labor-intensive retail and accommodation sector, which lost 202,000 jobs in August from a year earlier, was the hardest hit.

A total 105,000 jobs were lost from manufacturing industries, the report said.

However, the agriculture, construction and transport sectors saw a rise in the number of employed, partly offsetting the rise in the number of workers laid off.

The overall number of employed people rose by just 3,000 – also the worst since January 2010.

Each month’s worsening jobs report has sparked a strong public backlash, with President Moon Jae-in’s approval rating falling below 50 percent for the first time on Sept. 7.

A weekly Gallup Korea survey released on Friday showed Moon’s support fell 4 percentage points to 49 percent, the lowest since he took office in May 2017.

“At this rate, we may not see any gains in the number of employed in September or the month after that,” said Oh Suk-tae, an economist at Societe Generale.

Oh said economists at the Korea Development Institute, a state-run think tank, believed this year’s 16 percent increase in the minimum wage – the biggest jump in nearly two decades – was discouraging employers from hiring.

“The president should be held responsible for this, nothing could change the trend unless the boss changes his mind about minimum wage hikes,” Oh said.

The workforce participation rate declined slightly to 63.4 percent from 63.6 percent in July, as more jobs were lost than created, Statistics Korea data showed.

 
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In Iraq, a major Middle East grain buyer, will cut the irrigated area it plants with wheat by half in the 2018-2019 growing season as water shortages grip the country, a government official told Reuters.

Drought and dwindling river flows have already forced Iraq to ban farmers from planting rice and other water-intensive summer crops. Water scarcity was one of the issues galvanizing street protests in the country this year.

An investigation by Reuters in July revealed how Nineveh, Iraq’s former breadbasket, was becoming a dust bowl after drought and years of war.

This latest move is likely to significantly raise wheat imports.

Deputy Agriculture Minister Mahdi al-Qaisi said irrigated land grown with winter grains, namely wheat and barley, would be halved.

“The shortage of water resources, climate change and drought are the main reasons behind this decision, our expectation is the area will shrink to half,” Qaisi said in an interview.

Iraq’s agricultural plan included 1.6 million hectares of wheat last 2017-2018 season. Of those, around one million hectares were irrigated and the rest relied on rainfall.

“We expect that the irrigated wheat area falls to half of what it was last year,” Qaisi said, implying plantings of 500,000 hectares.

The cut is expected to lower the country’s wheat production by at least 20 percent, implying a significantly higher import bill Fadel al-Zubi, the U.N. Food and Agriculture Organization Iraq Representative said.

Iraq already has an import gap of more than one million tonnes per year, with annual demand at around 4.5 million to 5 million tons.

“Imports will go up as a result of cutting down on production and also as a result of population increase,” Zubi said but he declined to give an exact estimate for size of imports next year.

Haidar al-Abbadi, the head of Iraq’s General Union of Farmers, confirmed the cut saying water shortage was the main reason behind it.

“Irrigated wheat will reach 2 million donhums (500,000 hectares) down from around 4 million last season,” he said.

Qaisi said it was too early to tell the area of land that could be grown with wheat relying on rainfall this season but he hoped it would make up for some of the shortfall.

“We will follow a few programs to increase the crop, like raising yields and bringing Nineveh province back to more production … that can partly make up for shortfall,” he said.

But the rains failed Iraq’s Nineveh last season with the government procuring a little over 100,000 tonnes of wheat this year from a region that used to produce close to one million tons annually before Islamic State took over in 2014.

Iraq imports wheat to supply a rationing program created in 1991 to combat U.N. economic sanctions, including flour, cooking oil, rice, sugar and baby milk formula.

The trade ministry is responsible for procuring strategic commodities, including wheat, for the program.

Trade ministry officials were not immediately available for comment on a potential rise in imports.
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Young people are driving the growth of businesses that benefit society and the environment, the organizer of a global gathering of ethical entrepreneurs said as it opens Wednesday.

Some 1,500 people are meeting in Edinburgh as the 10th Social Enterprise World Forum — one of the most important networking events for the sector — returned to its birthplace after being hosted in Melbourne, Seoul and Rio De Janeiro.

“The key thing [that’s changed] in the decade is the transformational views of, and engagement with, young people,” Gerry Higgins, head of CEIS, which convenes the forum, told Reuters.

“Increasingly, young people are looking for careers of purpose, looking at social enterprise as a way of being involved in business and doing social good — and that has to be significant and heartening and positive.”

Scotland is the only country globally with a dedicated 10-year strategy to support social enterprises, or businesses that seek to make a profit while also doing good.

The country of 5 million has almost 6,000 social enterprises, providing about 80,000 jobs, the government says, many of them in poor rural communities.

Higgins, who has worked in the sector for more than 30 years, said he was encouraged by a rise in the number of universities teaching ethical entrepreneurs as well as growing interest from governments around the world.

Scores of universities, from Hong Kong and India to Greece and South Africa, now teach students about social enterprises, typically through work placements or incubating their startups.

Taiwan is sending more than 60 delegates to the forum as the government regards businesses with a social mission “as a way of reaching young people,” said Higgins.

“Ten years ago, when we pitched up in countries speaking with our partners to their government about social enterprise, God it was a hard sell,” he said.

But politicians are increasingly providing ethical firms with policy support, like the rest of the business sector, because they recognize the economic benefits they can deliver, he said.

“There are a lot of communities and individuals being supported by social enterprises around the world in a more sustainable way than existed 10 years ago,” he said.

“Ten years isn’t a long time in the growth of a business movement. We’re really at the start of the work of creating a global business model that’s used by an increasing number of people coming into the market.”
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Plans by South Africa’s government to change the law to allow land expropriation without compensation have provoked an emotional response, even reaching the ears of President Donald Trump, who signaled his disapproval last month in a controversial tweet in which he ordered U.S. officials to investigate the situation.

South Africa’s government says it may change the constitution to allow expropriation of some land without compensation, in a bid to redress historical wrongs that left land mostly in the hands of the white minority. Hearings began last month to look into the feasibility of expropriation without compensation. President Cyril Ramaphosa supports the idea and says any expropriation will only happen if land transfer does not harm the economy or the nation’s food security.

 

Farmers, many of whom belong to the white minority, say they live in fear of losing their land; meanwhile, pro-expropriation activists say returning land to members of the traditionally marginalized black majority is only right. And some analysts say this is nothing but a political ploy as the ruling party faces a tough election next year.

The farm

Casper Willemse grew up working a 2,000-hectare maize farm about an hour south of Johannesburg. For years, he’s toiled in the fields from sunup to sundown, as five generations of his family did before him.

 

He always thought he would die here, and be buried alongside them.

“I’m the sixth generation that was born on this farm,” he said. “My children is the seventh … We are farmers, from the morning until noon to night.”

 

The government hasn’t publicly identified which properties, if any, it will target.

Groups like AfriForum, which calls itself a civil rights watchdog with a focus on the white Afrikaans-speaking minority, have circulated what they say are government lists of potential seizures, but the government denies those.

AfriForum says their biggest fear is of the economic impact of such a policy. But even without that, they say talk about expropriation has provoked a rise in illegal land seizures. The group is among many critics of the plan who say they fear expropriation without compensation will hurt South Africa’s economy and will cause the same economic spiral as was seen in neighboring Zimbabwe, after that country began a series of seizures from white farmers nearly two decades ago.

 

“We are seeing an increase in land invasion throughout the country,” said Ian Cameron, the group’s head of community safety. “So there is a definite threat to property rights at the moment. And the uncertainty being created by government increases that problem.”

Willemse said the uncertainty is what fills him with anxiety – and about more than just his future. In the meantime, he said, he has to carry on: he employs 14 people, and can’t leave them hanging. Besides, he said, he has no backup plan.

He agreed that South Africa’s violent, unequal past was wrong. But why, he asked, should he pay the price?

 

“Taking something without compensation is nothing but stealing,” he said. “Buying the land, and giving that to somebody else, that’s a different story. But just taking it for political reasons, and giving it away – it’s not going to yield anymore, because that guy that’s going to get it, they don’t have passion about it, they don’t have knowledge, they don’t have resources. I think that’s not going to work.”

 

Land on demand

But the Black First Land First Movement says that’s beside the point. The relatively new political movement, which launched in 2015 and calls itself a revolutionary, pan-Africanist socialist movement, says much of South Africa’s land was stolen from its original black owners by white settlers during South Africa’s colonial and apartheid periods. Today, the majority of South African agricultural land is owned by white farmers.

 

The group’s deputy president, Zanele Lwana, said all of this land should be returned and no one has the right to ask what the new owners plan to do with it.

 

“We believe South Africa is a black country,” she told VOA. “And we believe that white people in this country are sitting on stolen property. And the call to call for land expropriation without compensation speaks to historical redress.”

Lwana also told VOA that the group considers land occupation a legitimate tactic if the government does not go through with its expropriation plans.

 

Playing politics?

Analysts and critics say the government is exploiting this sensitive issue to win votes for next year’s elections, a claim Lwana and her movement echo, alleging that Ramaphosa has no actual intention of enacting meaningful land reform.

 

Ramaphosa’s ruling African National Congress has been steadily losing ground at the polls, and analysts say an emotive issue like land redistribution could attract voters, especially lower-income black voters who comprise much of the ANC’s base.

 

“It is a genuine issue, but like all genuine issues, it has been handled with the view of securing short term political gains, unfortunately,” independent political analyst Ralph Mathekga told VOA.

 

Mathekga, who owns a 10-acre farm in the rural Limpopo province, said he understands the emotional aspect of the debate. He got permission from local leadership to farm there about three years ago.

 

“I grew up farming,” he told VOA. “That’s what I did. I used to put together the mules, that’s what I did before I went off to university.”

He said he has issues with the debate’s focus on land reform, though, instead of on agricultural reform. If this is going to work, he said, the government needs to assist new farmers in getting into the economy. If not, this story will not end well, he contends.

 

“I’ve never made a cent out of [the farm],” he said, adding that a recent drought and difficulty in finding eager, competent young workers have made it hard to profit. “It’s a highly risky business, and I think people need to think very carefully about it.”
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The U.S. federal deficit will reach $1 trillion by the end of the fiscal year, the nonpartisan Congressional Budget Office said Tuesday.

The CBO said in previous estimates that it did not expect to hit the milestone until 2020.

Spending rose by $222 billion, or 32 percent, in the first 11 months of fiscal 2018, compared with the same period last year.

In the current period, the deficit has reached $895 billion.

The CBO credited the surge to the new Republican tax law and increased government spending. Expenditures rose by 7 percent, while tax revenue rose by only 1 percent. 
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