The United States must show sincerity if it is to hold meaningful trade talks, China said on Friday, after U.S. President Donald Trump dramatically raised

the stakes with a potentially devastating blow to Chinese tech giant Huawei.

China has yet to say whether or how it will retaliate against the latest escalation in trade tension, although state media has taken an increasingly strident tone, with the ruling Communist Party’s People’s Daily publishing a front-page commentary that evoked the patriotic spirit of past wars.

China’s currency slid to its weakest in almost five months, although losses were capped after sources told Reuters that the central bank would ensure the yuan did not weaken past the key 7-per-dollar level in the immediate term.

The world’s two largest economies are locked in an increasingly acrimonious trade dispute that has seen them level escalating tariffs on each other’s imports in the midst of negotiations, adding to fears about risks to global growth and knocking financial markets.

Foreign ministry spokesman Lu Kang, asked about state media reports suggesting there would be no more U.S.-China trade talks, said China always encouraged resolving disputes between the two countries with dialog and consultations.

“But because of certain things the U.S. side has done during the previous China-U.S. trade consultations, we believe if there is meaning for these talks, there must be a show of sincerity,” he told a daily news briefing.

The United States should observe the principles of mutual respect, equality and mutual benefit, and they must also keep their word, Lu said, without elaborating.

On Thursday, Washington put telecoms equipment maker Huawei Technologies Co Ltd, one of China’s biggest and most successful companies, on a blacklist that could make it extremely difficult for the telecom giant to do business with U.S. companies.

That followed Trump’s decision on May 5 to increase tariffs on $200 billion worth of Chinese imports, a major escalation after the two sides appeared to have been close to reaching a deal in negotiations to end their trade battle.

‘Wheel of destiny’

China can be expected to make preparations for a longer-term trade war with the United States, said a Chinese government official with knowledge of the situation.

“Indeed, this is an important moment, but not an existential, live-or-die moment,” the official said.

“In the short term, the trade situation between China and the United States will be severe, and there will be challenges. Neither will it be smooth in the long run. This will spur China to make adequate preparations in the long term.”

The impact of trade friction on China’s economy is “controllable,” the state planner said on Friday, pledging to take countermeasures as needed, Meng Wei, a spokeswoman for the National Development and Reform Committee (NDRC), told a media briefing.

The South China Morning Post, citing an unidentified source, reported that a senior member of China’s ruling Communist Party said the trade war with the United States could reduce China’s 2019 growth by 1 percentage point in the worst-case scenario.

Wang Yang, the fourth-most senior member of the Communist Party’s seven-member Standing Committee, the top decision-making body, told a delegation of Taiwan businessmen on Thursday that the trade war would have an impact but would not lead to any structural changes, the paper said, citing an unidentified source who was at the meeting.

One company that says it has been making preparations is Huawei’s Hisilicon unit, which purchases U.S. semiconductors for its parent.

Its president told staff in a letter on Friday that the company had been secretly developing back-up products for years in case Huawei was one day unable to obtain the advanced chips and technology it buys from the United States.

“Today, the wheel of destiny has turned and we have arrived at this extreme and dark moment, as a super-nation ruthlessly disrupts the world’s technology and industry system,” the company president said in the letter.

The letter was widely shared on Chinese social media, gaining 180 million impressions in the few hours after it was published on the Weibo microblogging site.

“Go Huawei! Our country’s people will always support you,” wrote one Weibo user after reading the letter.
…

A record number of 8.34 million university graduates are set to enter the Chinese job market this summer amid escalating trade tensions between Washington and Beijing.

Observers say that as China’s export-dependent economy braces for more hits from tariff hikes, which U.S. President Donald Trump recently imposed, the country’s job markets will be tighter for everyone including fresh graduates.

And the impact of a job mismatch among college graduates has long weighed on their actual employment rate at only 52% this year, according to a recent survey.

That means more than 4 million graduates will soon join the ranks of those unemployed, although many of them may opt to pursue higher education, the survey found.

Tightening job market

“Graduate employment has always been problematic in China. Given the current situation with the trade war, I think we should expect it to be even more so this year,” said Geoffrey Crothall, spokesperson at China Labor Bulletin.

“And there’s always been a mismatch between the expectations of graduates, the reality of the job markets and particularly the expectations of employers,” he added.

Graduates will either take longer to find a job or settle with one that has lower pay or poor career prospects, Crothall said.

Making matters worse, the number of job opportunities in China is on the wane as China tries to move away from labor-intensive industries, said Wang Zhangcheng, head of the Labor Economics Institute at the Zhongnan University of Economics and Law.

“The transformation of industrial structure and the U.S.-China trade war [is making the situation worse]. Also, China’s economy no longer grows at a fast pace. Instead, it has matured with mid- to low-paced growths. Under such circumstances, the demand for labor has declined,” Wang said.

“Plus, many jobs have been replaced by robots as a result of the development of artificial intelligence in the past two years. That surely adds pressure on job seekers,” he added.

Fewer jobs, more seekers

A recent report by Renmin University of China (RUC) and career platform Zhaopin.com found that the number of job seekers in China grew 31% year-on-year in the first quarter – the highest growth in workers since 2011 — while the number of job vacancies shrank by 11% at the same time.

China’s job market prosperity index has dropped to a record low since 2014, it concluded.

However, the latest available state statistics paint a slightly different picture.

Official data showed that China’s surveyed unemployment rate in urban areas stood at 5.2% in March, down 0.1 percentage points from February.

Analysts described the country’s job markets as “stable overall” although the surveyed unemployment rate in 31 major cities went up 0.1 percentage points month-on-month, to 5.1% in March – the highest since late 2016.

Still, China’s State Council has made “saving jobs” one of its top policy priorities since late last year, offering incentives for firms with no or few layoffs and subsidies for internships or on-the-job training.

And college graduates remain a focal point of the council’s employment stabilization plan, along with migrants and laid-off workers.

Distorted graduate employment

China used to boast a graduate employment rate of more than 90% as universities rushed graduates to sign so-called “tripartite employment agreements” with potential employers.

Any refusal may risk their chances of thesis defense or diplomas.

Such agreements are nonbinding on the employers to offer jobs, but distort the overall graduate employment rate, which has allowed universities to attract new students – a fraud that the Ministry of Education now forbids.

In a recent notice, the ministry has disallowed universities from withholding graduates’ degree certificates if they refuse to sign such agreements.

In spite of the ban, graduates still complain about “being forcefully employed.”

On Weibo, China’s Twitter-like microblogging platform, one user wrote, “Our school still forces you to sign the agreements. The career adviser calls every day, pulling a long face.”

Another student from Rizhao Polytechnic in Shandong province noted, “Those who have signed the agreements have completed their thesis defense while many of us who haven’t signed the agreements can do nothing but wait.”

One user urged that unless the government writes the ban into law and imposes penalties, no universities would comply.

Job mismatch

Another cause of concern for graduate employment is the long-standing mismatch between the knowledge and skills students have acquired from years of studies in universities, and the private sector’s actual job requirements, professor Wang said.

Given the shifts of production paradigms and “widening structural gaps in labor forces allocations, many of our universities have set up professional courses which may not keep up with the changing [requirements] of the labor markets. That leads to the scenario that many graduates may not find the right career fit for their skills,” the professor said.

As a solution, the education ministry has encouraged universities to focus on fundamentals by providing multifaceted cultivation of talents, so graduates leaving school will meet what different jobs require.
…

Juhyun Lee contributed to this report.

SEOUL — As U.S. President Donald Trump intensifies his trade battle with China, one of the hardest-hit countries could be South Korea.

Asia’s fourth-largest economy, South Korea is especially vulnerable to the tariff war because of its reliance on foreign trade — in particular, exports to its two biggest trading partners: China and the United States.

After U.S.-China trade talks broke down, Trump last week raised tariffs on $200 billion worth of Chinese imports, and threatened to do so with $300 billion more. China retaliated with tariffs on $60 billion of U.S. goods.

The trade war escalation, which rattled markets and threatened to hold back global growth, comes at an especially bad time for South Korea, whose economy unexpectedly contracted in the first quarter.

“South Korea is particularly vulnerable,” says Xu Xiao Chun, an economist who monitors South Korea for Moody’s Analytics. “It’s not inconceivable that you could see a second consecutive quarter of contraction of GDP, which would make it a technical recession.”

Trade war exacerbates tech woes

As the world’s leading producer of memory chips that go into consumer electronics, such as cellphones and computers, South Korea benefited from years of rapid and consistent growth in the global smartphone market.

But global demand for smartphones has plateaued. That, combined with a slowdown in China and sluggish global growth, has hurt South Korea’s export-driven economy.

In April, South Korea’s exports declined for the fifth consecutive month, falling 2% compared to the same period a year earlier.

“South Korea’s economy was already going down the wrong path… but the latest escalation in the trade war really puts a spanner (obstacle) in the works,” Xu said.

South Korea was always likely to be hurt by the U.S.-China trade war just by virtue of its proximity to China, its biggest trading partner and top export destination.

South Korea’s exports to China could be cut by about $1.3 billion a year, said An Sung-bae with the state-run Korea Institute for International Economic Policy.

But the U.S.-China tariffs also pose a more specific threat to South Korea’s crucial semiconductor industry.

Here’s how it works:

South Korea sends semiconductors to China, where they are placed into smartphones and other electronics. China then ships many of those assembled products to the United States.

Trump’s tariffs could drastically raise the price of those electronics. For example, the cost of an iPhone XS could go up by around $160 if Trump follows through on all his tariff threats, one analyst at Morgan Stanley estimated.

Those higher prices would result in fewer shipments of electronics from China to the United States. Which means South Korea would be selling a lot fewer semiconductors to China.

That could put a major dent in South Korea’s economy, since semiconductors make up nearly half of its total shipments to China.

“Companies that mainly target the Chinese market will suffer… and the South Korean export business relies heavily on the Chinese market,” said Mun Byung-Ki, a senior researcher at the Korea International Trade Association.

A bright spot?

But some analysts say the situation may not be that dire. One reason: even if South Korean exports to China decline, it may make up the gap by shipping more products to the United States — a situation that could potentially provide a major boom for South Korea’s tech industry.

Alex Holmes, a Singapore-based analyst at Capital Economics, says that already may be happening. Though South Korea’s overall export numbers are suffering, its shipments to the United States are growing, he says.

That’s particularly the case for Korean electronics that fall under U.S. tariffs. Those tariffed goods have well out-performed non-tariffed items, Holmes says, “which suggests that U.S. companies have already switched suppliers as a result of tariffs.”

The increased shipments to the United States almost cover the equivalent hit South Korea has taken as a result of the tariffs, Holmes adds.

Manufacturing shift?

The tariffs could also have a long-term impact on manufacturing in Asia, as companies shift their production bases away from China as a way to shield themselves from the trade war.

A growing number of Asian companies, including some South Korean memory chipmakers, have already begun shifting their manufacturing centers to fast-growing and cheaper countries in Southeast Asia.

“If South Korea wants to find cheaper factories in say Vietnam or one of the ASEAN countries, it could make its money back or potentially even grow more than it would have if it relied on Chinese manufacturing,” Xu said. “But those sort of actions take a lot of time, a lot of capital, and there is a lot of risk involved.”

With no end in sight to the U.S.-China trade tensions, it’s a pattern that could be repeated, threatening China’s reputation as a low-cost production base.

“The knock-on effect of this trade war will be to locate a lot more production capabilities in other countries in Asia,” Xu said.
…

Executives from major global retailers played down the threat to employment in stores from artificial intelligence and automation on Thursday and pledged more training to help staff adopt more high-value tasks as machines take over their work.

Retail is one of the largest employers in many developed economies and experts have predicted automation puts millions of low-skilled jobs in the sector at risk, particularly as the introduction of self-checkouts makes cashiers redundant.

“Technology can liberate people from repetitive tasks,” Barbara Martin Coppola, chief digital officer at Swedish furniture giant IKEA, told Reuters on the sidelines of the World Retail Congress, an annual industry gathering.

“These jobs are not gone. We are believers in the talent we have in our house and we look to repurpose it into more fulfilling tasks.”

Martin Coppola said IKEA needs far fewer people to select the goods displayed on the firm’s website, known as online merchandising, as algorithms get more sophisticated. But these people can be trained in digital marketing instead.

“It is important to see technology as an enabler and not to let it be at the expense of human beings and the planet,” she said.

Walmart, the world’s biggest private employer with 2.2 million staff, has been adding self check-outs and announced last month that it would be rolling out automated shelf scanners, to check product availability, and cleaning robots.

“Cleaning the floor is not a thing that brings a person fulfillment,” said Tom Faitak, Walmart’s senior manager for AI, robotics and automation, adding that automating repetitive tasks gives staff more time to help customers.

“Robots are not fantastic at interacting with people,” he said. “Robots are good at doing the same task over and over, not finding an item on the shelf.”

Walmart staff who are freed up from some repetitive tasks are increasingly being redeployed to pick orders placed online and prepare them for curbside pickup.

Consultants McKinsey estimate that 53 percent of activities in retailing are automatable, particularly in stock management and logistics. It predicts that next generation automated grocery stores could see the number of labor hours for inventory and stocking cut by two thirds.

Walmart and Kroger – the biggest U.S. supermarket chain — say they are committed to developing their store workers so they are not left behind.

Walmart offers training to tens of thousands of associates through an “Academy” program, while Kroger launched a new scheme last year to promote continued education, from high school certificates to doctorates.

Kroger Chairman and Chief Executive Rodney McMullen, who started out as a store clerk at the chain and had his college education supported by the company, noted that U.S. unemployment was at its lowest for decades, pushing automation.

“Part of it is because you just can’t find people,” he said, noting that the company was creating higher-paid jobs in software engineering as it seeks to modernize the business. The Cincinnati-based company has built robot-aided warehouses and is trying out self-driving vehicles to improve delivery.
…

Executives from major global retailers played down the threat to employment in stores from artificial intelligence and automation on Thursday and pledged more training to help staff adopt more high-value tasks as machines take over their work.

Retail is one of the largest employers in many developed economies and experts have predicted automation puts millions of low-skilled jobs in the sector at risk, particularly as the introduction of self-checkouts makes cashiers redundant.

“Technology can liberate people from repetitive tasks,” Barbara Martin Coppola, chief digital officer at Swedish furniture giant IKEA, told Reuters on the sidelines of the World Retail Congress, an annual industry gathering.

“These jobs are not gone. We are believers in the talent we have in our house and we look to repurpose it into more fulfilling tasks.”

Martin Coppola said IKEA needs far fewer people to select the goods displayed on the firm’s website, known as online merchandising, as algorithms get more sophisticated. But these people can be trained in digital marketing instead.

“It is important to see technology as an enabler and not to let it be at the expense of human beings and the planet,” she said.

Walmart, the world’s biggest private employer with 2.2 million staff, has been adding self check-outs and announced last month that it would be rolling out automated shelf scanners, to check product availability, and cleaning robots.

“Cleaning the floor is not a thing that brings a person fulfillment,” said Tom Faitak, Walmart’s senior manager for AI, robotics and automation, adding that automating repetitive tasks gives staff more time to help customers.

“Robots are not fantastic at interacting with people,” he said. “Robots are good at doing the same task over and over, not finding an item on the shelf.”

Walmart staff who are freed up from some repetitive tasks are increasingly being redeployed to pick orders placed online and prepare them for curbside pickup.

Consultants McKinsey estimate that 53 percent of activities in retailing are automatable, particularly in stock management and logistics. It predicts that next generation automated grocery stores could see the number of labor hours for inventory and stocking cut by two thirds.

Walmart and Kroger – the biggest U.S. supermarket chain — say they are committed to developing their store workers so they are not left behind.

Walmart offers training to tens of thousands of associates through an “Academy” program, while Kroger launched a new scheme last year to promote continued education, from high school certificates to doctorates.

Kroger Chairman and Chief Executive Rodney McMullen, who started out as a store clerk at the chain and had his college education supported by the company, noted that U.S. unemployment was at its lowest for decades, pushing automation.

“Part of it is because you just can’t find people,” he said, noting that the company was creating higher-paid jobs in software engineering as it seeks to modernize the business. The Cincinnati-based company has built robot-aided warehouses and is trying out self-driving vehicles to improve delivery.
…

U.S. homebuilding increased more than expected in April and activity in the prior month was stronger than initially thought, suggesting declining mortgage rates were starting to provide some support to the struggling housing market.

Land and labor shortages, however, continue to constrain builders’ ability to construct more lower priced houses. This segment has experienced an acute shortage of inventory, holding back home sales. Investment homebuilding has contracted for five straight quarters.

Housing starts rose 5.7% to a seasonally adjusted annual rate of 1.235 million units last month, driven by gains in the construction of both single- and multi-family housing units, the Commerce Department said on Thursday. Groundbreaking was also likely boosted by drier weather in the Midwest.

Data for March was revised up to show homebuilding rising to a pace of 1.168 million units, instead of falling to a rate of 1.139 million units as previously reported.

The government revised the seasonally adjusted data back to January 2014. The unadjusted series will be revised in July.

Building permits rose 0.6% to a rate of 1.296 million units in April. Building permits had declined for three straight months. Permits for single-family housing, however, fell for a fifth straight month, likely reflecting the supply challenges.

Economists polled by Reuters had forecast housing starts would increase to a pace of 1.205 million units in April.

The 30-year fixed mortgage rate has dropped to 4.10% from a peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. Decreasing mortgage rates reflect a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.

Strong labor market

Relatively cheaper home loans and a strengthening labor market, characterized by the lowest unemployment rate in nearly 50 years, are underpinning demand for housing. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 212,000 for the week ended May 11.

The robust job market should underpin the economy as the boost from the White House’s $1.5 trillion tax cut package fades and President Donald Trump’s escalating trade war with China disrupts supply chains at factories, which are already struggling with an inventory bloat that has cut production.

A survey on Wednesday showed confidence among homebuilders rose to a seven-month high in May. While lower borrowing costs are boosting demand, builders said they “continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

The housing market has been mired in a soft patch since last year. Investment in homebuilding contracted at a 2.8% annualized rate in the first quarter.

Prices of U.S. Treasuries fell after the release of the data while the dollar rose to a session high against a basket of currencies. U.S. stock index futures were trading higher. Last month, single-family homebuilding, which accounts for the largest share of the housing market, increased 6.2% to a rate of 854,000 units. Single-family homebuilding surged in the Midwest, which had suffered flooding in prior months. Single-family starts also rose in the Northeast and West, but fell in the South, where the bulk of homebuilding occurs.

Permits to build single-family homes dropped 4.2% to a rate of 782,000 units in April.

Starts for the volatile multi-family housing segment advanced 4.7% to a rate of 381,000 units last month. Permits for the construction of multi-family homes rebounded 8.9% to a pace of 514,000 units last month.
…

U.S. homebuilding increased more than expected in April and activity in the prior month was stronger than initially thought, suggesting declining mortgage rates were starting to provide some support to the struggling housing market.

Land and labor shortages, however, continue to constrain builders’ ability to construct more lower priced houses. This segment has experienced an acute shortage of inventory, holding back home sales. Investment homebuilding has contracted for five straight quarters.

Housing starts rose 5.7% to a seasonally adjusted annual rate of 1.235 million units last month, driven by gains in the construction of both single- and multi-family housing units, the Commerce Department said on Thursday. Groundbreaking was also likely boosted by drier weather in the Midwest.

Data for March was revised up to show homebuilding rising to a pace of 1.168 million units, instead of falling to a rate of 1.139 million units as previously reported.

The government revised the seasonally adjusted data back to January 2014. The unadjusted series will be revised in July.

Building permits rose 0.6% to a rate of 1.296 million units in April. Building permits had declined for three straight months. Permits for single-family housing, however, fell for a fifth straight month, likely reflecting the supply challenges.

Economists polled by Reuters had forecast housing starts would increase to a pace of 1.205 million units in April.

The 30-year fixed mortgage rate has dropped to 4.10% from a peak of about 4.94% in November, according to data from mortgage finance agency Freddie Mac. Decreasing mortgage rates reflect a recent decision by the Federal Reserve to suspend its three-year monetary policy tightening campaign.

Strong labor market

Relatively cheaper home loans and a strengthening labor market, characterized by the lowest unemployment rate in nearly 50 years, are underpinning demand for housing. In a separate report on Thursday, the Labor Department said initial claims for state unemployment benefits dropped 16,000 to a seasonally adjusted 212,000 for the week ended May 11.

The robust job market should underpin the economy as the boost from the White House’s $1.5 trillion tax cut package fades and President Donald Trump’s escalating trade war with China disrupts supply chains at factories, which are already struggling with an inventory bloat that has cut production.

A survey on Wednesday showed confidence among homebuilders rose to a seven-month high in May. While lower borrowing costs are boosting demand, builders said they “continue to deal with ongoing labor and lot shortages and rising material costs that are holding back supply and harming affordability.”

The housing market has been mired in a soft patch since last year. Investment in homebuilding contracted at a 2.8% annualized rate in the first quarter.

Prices of U.S. Treasuries fell after the release of the data while the dollar rose to a session high against a basket of currencies. U.S. stock index futures were trading higher. Last month, single-family homebuilding, which accounts for the largest share of the housing market, increased 6.2% to a rate of 854,000 units. Single-family homebuilding surged in the Midwest, which had suffered flooding in prior months. Single-family starts also rose in the Northeast and West, but fell in the South, where the bulk of homebuilding occurs.

Permits to build single-family homes dropped 4.2% to a rate of 782,000 units in April.

Starts for the volatile multi-family housing segment advanced 4.7% to a rate of 381,000 units last month. Permits for the construction of multi-family homes rebounded 8.9% to a pace of 514,000 units last month.
…

Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating, a senior Moody’s sovereign analyst said on Thursday.

New analysis from the rating agency shows Turkey’s recession, the slump in the lira, upcoming refinancing pressures and dwindling reserves have pushed it to right near the top of its worldwide external vulnerability index.

“Failure to put forward a credible broad-based plan to address the structural issues, and in the near-term dampen the market volatility pressure on the lira…that would be a pressure point from a rating perspective,” Moody’s Managing Director of Sovereign Risk, Yves Lemay, told Reuters.

Moody’s downgraded Turkey to Ba3 – three rungs into junk territory – last August, but it also kept it on a ‘negative’ outlook which is a warning that another cut could happen in 12-18 months.

It gives it some time and one of Turkey’s main plusses is that it has a low debt-to-GDP level of about 30 percent, but the likelihood is that an economic plan would be laid out after Istanbul’s mayoral elections have been re-run on June 23.

“For us, the critical issue is whether this administration has the capacity to move aside the political issues and focus on the economic needs of the country,” Lemay said, adding that the repeat of the Istanbul vote had underscored concerns.

“It is another manifestation of the domestic political risk in this instance, and the weakening of the institutions of the country.”

With regards to the drop in currency reserves, he added: “When we look at the size of what [sovereign and bank debt] is coming due in the next year against the size of the reserves, it is a signal of significant vulnerability.”

“The amount of reserves is very much insufficient to refinance the external obligations.”

Moody’s calculates the Turkish government’s interest payments rose 30.4% in nominal terms last year and almost 50% in the first three months of 2019 due to the weak lira and a rise in payments.

As a result it expects interest payments to increase to around 8.2% of the government’s revenue in 2019 from only 5.9% in 2017, “eroding” the government’s fiscal strength.
…

Turkey needs to put a comprehensive and credible economic plan in place if it is to avoid another cut to sovereign credit rating, a senior Moody’s sovereign analyst said on Thursday.

New analysis from the rating agency shows Turkey’s recession, the slump in the lira, upcoming refinancing pressures and dwindling reserves have pushed it to right near the top of its worldwide external vulnerability index.

“Failure to put forward a credible broad-based plan to address the structural issues, and in the near-term dampen the market volatility pressure on the lira…that would be a pressure point from a rating perspective,” Moody’s Managing Director of Sovereign Risk, Yves Lemay, told Reuters.

Moody’s downgraded Turkey to Ba3 – three rungs into junk territory – last August, but it also kept it on a ‘negative’ outlook which is a warning that another cut could happen in 12-18 months.

It gives it some time and one of Turkey’s main plusses is that it has a low debt-to-GDP level of about 30 percent, but the likelihood is that an economic plan would be laid out after Istanbul’s mayoral elections have been re-run on June 23.

“For us, the critical issue is whether this administration has the capacity to move aside the political issues and focus on the economic needs of the country,” Lemay said, adding that the repeat of the Istanbul vote had underscored concerns.

“It is another manifestation of the domestic political risk in this instance, and the weakening of the institutions of the country.”

With regards to the drop in currency reserves, he added: “When we look at the size of what [sovereign and bank debt] is coming due in the next year against the size of the reserves, it is a signal of significant vulnerability.”

“The amount of reserves is very much insufficient to refinance the external obligations.”

Moody’s calculates the Turkish government’s interest payments rose 30.4% in nominal terms last year and almost 50% in the first three months of 2019 due to the weak lira and a rise in payments.

As a result it expects interest payments to increase to around 8.2% of the government’s revenue in 2019 from only 5.9% in 2017, “eroding” the government’s fiscal strength.
…