Business

ISTANBUL — Turkey's central bank on Thursday delivered a huge surprise by raising the interest rate to 25 per cent as part of a transition from President Recep Tayyip Erdogan's era of unorthodox economics.

The hike of 7.5 percentage points follows a raise to 17.5 per cent from 15 per cent last month.

Most economists had expected the bank to increase its policy rate Thursday to 20 per cent.

"Recent indicators point to a continued increase in the underlying trend of inflation," the central bank said.

"Monetary tightening will be further strengthened as much as needed in a timely and gradual manner until a significant improvement in the inflation outlook is achieved," it said.

The lira gained 1.5 per cent against the dollar in wake of the bank's strong signal that is was stepping up its fight against inflation and attempts to support the troubled currency.

Capital Economics analyst Liam Peach said the "much larger-than-expected" rate increase "will go a long way towards reassuring investors that the shift back to policy orthodoxy is on track".

Erdogan infused his government with market-friendly faces after winning a difficult May election that came in the heat of one of Turkey's most dire economic crises in decades.

They immediately set off on a new battle against inflation that peaked at an annual rate of 85 per cent last October and is on the rise once again.

The team allowed the lira to start depreciating against the dollar in a bid to ease pressure on depleted state coffers.

They also imposed a series of more technical steps aimed at balancing the economy and restoring the trust of both consumers and Turkey's foreign investors.

'Large gap'

The central bank increased its key rate to 15 per cent from 8.5 per cent at the first meeting chaired by former Wall Street executive Hafize Gaye Erkan in June.

Erdogan had pushed the nominally independent institution to slash borrowing costs out of a life-long belief that high interest rates cause — rather than cure — inflation.

But Erkan and Finance Minister Mehmet Simsek had advocated a more go-slow approach in the past two months that tried to restore market confidence without causing too much short-term pain.

That appeared to change when July's annual inflation rate soared back to 47.8 per cent thanks to billions of dollars in social spending Erdogan meted out during his election campaign.

The central bank expects the annual inflation rate to peak at 60 per cent in between April and June of next year.

"There remains a large gap between the policy rate and both current and expected inflation," ING bank's chief economist Muhammet Mercan warned.

Some analysts suspected that Erkan and Simsek feared a revolt from Erdogan should they push their reforms too strongly.

Erdogan fired one central banker four months into his attempts to interest raise rates in late 2020 and early 2021.

He dismissed two others before then for fighting his unorthodox approach.

Vote of confidence 

But Erkan's hand was strengthened following the appointment of three more respected economists to top central bank positions in the past month.

These bankers are "giving Hafize Gaye Erkan the backing to be more aggressive with rate hikes", emerging markets economist Timothy Ash said.

"The Turkish central bank now has a really impressive team in place — there is light at the end of the tunnel."

Erdogan gave his new team a new vote of confidence in prepared remarks delivered shortly after the decision.

"We are taking determined steps to address the problems caused by inflation," Erdogan said.

"We have started to see the positive impact of the measures already taken."

HANOI — One of Vietnam's largest shoemakers for brands such as Nike, Adidas and Reebok will cut jobs for the third time this year, state media said Wednesday, citing a lack of orders.

The Southeast Asian country is among the world's largest exporters of clothing, footwear and furniture but its economic growth has been slow in the first half of the year as a slump in demand hits exports.

PouYuen Vietnam, a unit of Taiwan-based Pou Chen Group, will lay off around 1,200 workers with permanent contracts from the end of August, VnExpress said, citing a local official in Ho Chi Minh City on Wednesday.

"PouYuen Vietnam said the job cuts are due to no recovery in terms of orders. Only a few clients made orders," VnExpress reported.

The firm is among the largest employers in Ho Chi Minh City, Vietnam's commercial capital, with an estimated 40,000 workers.

This is the third time this year that it has cut jobs. It announced in May almost 6,000 workers with permanent contracts would be laid off, after letting go almost 3,000 permanent staff in February.

That came after PouYuen put 20,000 of its workers on paid leave in rotation last year.

More than 217,000 workers lost their jobs in Vietnam during the second quarter of 2023, according to the country's General Statistics Office.

They were mainly working to produce textiles, footwear and electronics.

DUBAI — Passenger traffic at Dubai international airport leapt 50 per cent in the first half of the year, surpassing pre-pandemic levels, its operator said on Tuesday.

Dubai, the world's busiest airport for international passengers before COVID-19, had 41.6 million visits in the six months to June, just over the number recorded in the first half of 2019, Dubai Airports said in a statement.

The passenger figure also marks a 50 per cent increase from the 27.9 million seen in the same period last year. 

"As we recover with our (first-half) traffic surpassing pre-pandemic levels, we continue to remain committed to ensuring every guest who travels through our airport leaves with a smile," said Paul Griffiths, CEO of Dubai Airports. 

Passenger forecasts for the second half of the year have been raised to 85 million, up from 83.6 million.

"Dubai Airports is optimistic about the levels of demand and is expecting record-breaking numbers during the winter season," the company said in a statement.

"We're preparing for an exceptionally busy rest of the year."

Dubai airport closed briefly to commercial flights from March to July 2020 but was one of the first travel hubs to reopen after the pandemic.

In 2020, it received only 25.9 million passengers, down from the 86 million the previous year.

FRANKFURT — Germany's "lacklustre" economy will likely stagnate again in the third quarter, the Bundesbank central bank said Monday, as weak demand from abroad and high interest rates take their toll on Europe's industrial powerhouse.

After preliminary estimates suggested that the economy recorded zero growth in the second quarter of 2023, the outlook for the July-September period was not much better, the Bundesbank said in its monthly report.

"German economic output will probably remain largely unchanged again in the third quarter," it said.

Europe's largest economy is "still lacklustre" and "still experiencing a period of weakness", it added.

The gloomy outlook adds to concerns that Germany will drag down the eurozone's economic performance this year, with the International Monetary Fund predicting it will be the only major advanced economy to shrink in 2023.

National statistics agency Destatis will release final data for the second quarter on Friday.

The German economy shrank over the two preceding quarters, meeting the technical definition of a recession.

Germany's key industrial sector, traditionally a driver of growth, has been hit particularly hard in recent months as exports have plummeted against a backdrop of high inflation and subdued global activity.

Even though supply chain bottlenecks have eased, "industrial output looks set to remain weak", the report said, "as foreign demand has been on a downward trend of late".

While economic activity in the United States, a major trading partner, was in "comparatively good shape", the bank noted that key client China's post-COVID recovery had "quickly lost momentum".

Higher borrowing costs as a result of the European Central Bank's (ECB's) interest rate rises, aimed at bringing down inflation, will also continue to weigh on investment and the construction sector, the Bundesbank added.

On a brighter note, private consumption was likely to shore up the economy in the third quarter thanks to stable employment, higher wages and declining inflation.

Germany's annual inflation rate slowed to 6.2 per cent in July, mainly on the back of lower energy prices. 

But wage pressures were likely to keep inflation above the ECB's two-percent target "for longer", the report said.

"Wage growth will probably remain strong, even going into the new year," it said.

Germany's leading economic institutes expect the economy to shrink by 0.2 to 0.4 per cent over the whole of 2023.

BEIJING — Apple megafans flocked to Beijing's swish flagship store on Friday as the tech giant kicked off its fourth decade in gadget-mad China — even as it looks to shift some production out of the country.

The California-based company held a series of events in Beijing at the first retail store it ever opened in China to mark the milestone of 30 years in the key consumer market.

Enthusiasts gathered at the sleek showroom in the commercial Sanlitun district to soak up the event, which featured an appearance by renowned Chinese record producer Zhang Yadong and several short films shot and edited entirely on Apple products.

"I'm an old Apple fan," said 17-year-old high school student Hu Jiarong in front of the Beijing store.

"You could say I'm a hardcore fan. I've used iPhones since the 6s all along until the 14 Pro," he added.

"I feel that each new generation is stronger than the last."

Since the US-based tech giant first established a presence in China in 1993, Apple has grown into a major provider of smartphones, laptops and consumer electronics in the country.

But last year, sales were hit by curtailed production at factories as a result of China's zero-COVID policy.

And US export controls on high-tech components are also threatening the company's supply chain.

Despite the developments, the firm still enjoys a strong base of loyal consumers in China.

Twenty-two-year-old university student Vicky Zhang told AFP outside the store that she has been using Apple's iPhones since she was in middle school.

"It's very comfortable to use, the packaging is very simple, and there aren't any messy and chaotic icons," said Zhang.

Asked if Apple's relocating of production outside of China would impact her future smartphone purchasing decisions, Zhang said: "I don't think so.

"I think it's just the trend, and not a loss of points from my perspective."

In March, Apple CEO Tim Cook visited Beijing, saying his company enjoyed a "symbiotic" relationship with China.

"For 30 years, we've been proud to serve local people," Cook said in an online statement on Friday congratulating the firm on the anniversary.

"We'll continue to do our part in enriching the lives of Chinese customers, helping them reach their full potential, and trying our hardest to make the world a better place."

GENEVA — Doctors Without Borders (MSF) said on Thursday a deal aimed to bring long-term preventative HIV treatment to vulnerable populations was on hold after the drug maker imposed pricing confidentiality.

In a statement, MSF called on ViiV Healthcare, to withdraw unacceptable conditions suddenly added to a long-negotiated purchase agreement for the preventative HIV drug cabotegravir long-acting (CAB-LA).

These conditions, including a confidentiality clause on the drug's price and supply terms, "are not acceptable in MSF purchase agreements", the statement said.

MSF warned that the new conditions were holding up its procurement of the drug, which it said was the most effective form of HIV prevention available today.

ViiV Healthcare is a subsidiary of British pharmaceutical giant GSK.

A spokesperson for Viiv said: "We share MSF's ambition to enable access to cabotegravir LA for PrEP.

"We remain committed to supporting our partners, and we're currently working closely on contract negotiations with MSF to enable access to cabotegravir LA for PrEP as quickly as possible."

MSF said it had been negotiating the deal since early 2022, with the aim to first bring the highly effective drug, given as an injection every eight weeks instead of as daily pills, to vulnerable populations in Mozambique.

But a few months ago ViiV had suddenly added the confidentiality clause, it said.

It had also announced it retained the power to terminate the contract or refuse the purchase order without just reasons, in what MSF said undermined supply security. 

MSF is "stuck in an infuriating situation", Helen Bygrave with the MSF Access Campaign said in the statement.

"There's a lifesaving HIV prevention drug at our fingertips, but ViiV, the only corporation producing CAB-LA for at least the next three to four years, is deliberately putting up red tape to delay access for people in our care."

'Stop stalling' 

In May last year, the Health Gap civil society group alleged that ViiV had set an access price for CAB-LA at $23,000 per person per year in the United States, and at $240-270 per person per year in low-income countries, "putting the drug far out of reach for those who need it most".

MSF said Thursday that "the new access price is not expected to be significantly different".

"Regardless, ViiV continues to undermine the established good practices of transparency on HIV drug prices and supply terms in its ongoing negotiations with procurers, by attempting to reinstate confidentiality clauses around the price and supply terms of CAB-LA," it said.

The medical charity said that since it first began responding to the HIV crisis more than two decades ago, it had consistently refrained from signing such clauses, akin to Non-Disclosure Agreements, as part of its efforts to help promote access to affordable, quality-assured treatments.

Bygrave called on ViiV to "stop stalling... so that we can make sure people in our care are offered the most effective HIV prevention as quickly as possible".

"MSF remains open to finding an immediate solution and awaits the response from ViiV."

WASHINGTON — Mortgage rates in the United States have surged to the highest since 2002, said a home loan finance company Thursday, adding pressure to buyers who are already grappling with high costs and low inventory.

The popular 30-year fixed-rate mortgage reached 7.09 per cent this week, said Freddie Mac in a statement, adding that it last rose above the 7 per cent threshold in November 2022.

The housing market has been reeling since interest rates rapidly climbed in recent months, a trend that has made home owners reluctant to put their properties up for sale — having previously locked in lower rates on their mortgages.

The current rate will "make it even more difficult for potential homebuyers to afford the new home that they're looking for," said Economist Oren Klachkin of Oxford Economics.

"It's just becoming increasingly unaffordable. Rates are high, there're also signs that the flow of credit is being tightened as well and because of this, there's basically no supply out there," he told AFP.

A year ago, the 30-year rate stood at 5.13 per cent while rates hovered below 3 per cent in late 2020.

The latest 7.09 per cent figure is the highest since April 2002, according to Freddie Mac data.

"The more rates rise, the less likely you are to list your house because it just means that you have to move from your sub-four per cent mortgage into a new mortgage," Klachkin said.

This could potentially double the cost of home owners' monthly payments, if rates go to 8 per cent, he added.

In June, sales of existing homes fell to the slowest rate since January while the median sales price hit the second-highest on record, according to National Association of Realtors (NAR) data.

The NAR noted that a third of homes were sold above list price that month.

With a lack of existing homes for sale, buyers have been pushed into the market for new properties.