Turkey's jobless, budget data, dispute with US weaken lira

ANKARA: The Turkish lira closed at its weakest level since October on the unemployment rate surging to its highest in nearly a decade, higher than expected budget deficit and tensions with the U.S.

The unemployment rate jumped to 14.7 percent in the December-February period, its highest level in nearly a decade according to official data, as the effects of last year's currency crisis continued to weigh on workers.

Later on Monday, the Turkish budget showed a deficit of 24.5 billion lira ($4.24 billion) in March, up from 16.8 billion lira a month earlier, data showed.

Turkish assets were also impacted by the defence minister's remarks in Washington, as he said the purchase of Russian air defence missile systems should not trigger U.S. sanctions as Ankara remains committed to the NATO alliance.

Speaking at a U.S.-Turkey conference in Washington amid rising tensions between the two NATO allies over Ankara's plan to buy the Russian S-400 missile system, Defence Minister Hulusi Akar adopted a relatively conciliatory tone and urged to resolve issues via dialogue.

The disagreement over the F-35 is the latest in a series of diplomatic disputes between the United States and Turkey including Turkish demands that the U.S. extradites Islamic cleric Fethullah Gulen, differences over Middle East policy and the war in Syria, and sanctions on Iran.

Turkish President Tayyip Erdogan has refused to back down from Ankara's planned purchase of a Russian S-400 missile defense system that the U.S. has said would compromise the security of F-35 aircraft, made by Lockheed Martin Corp LMT.N. Turkey has said it will take delivery of the S-400s in July.

In early April, the U.S. halted delivery of equipment related to the stealth F-35 fighter aircraft to Turkey, marking the first concrete U.S. step to potentially blocking the delivery of the jet to the NATO ally.

WEAKER LIRA

The Turkish lira closed at 5.8130, after having closed just above 5.75 on Friday. It was the weakest closing level since October, 2018.

The Turkish economy contracted a sharper than expected 3 percent in the fourth quarter of 2018, its worst performance in nearly a decade, indicating that last year's near 30 percent slide in the lira had tipped it into recession.

Both President Erdogan and Finance Minister Berat Albayrak, his son-in-law, have said Turkey has left the worst of its economic troubles behind, and Albayrak last week announced a series of structural measures to prop up the ailing economy.

Inflation has slipped from last year's high but remains elevated, and the country's current account deficit has narrowed sharply.

However, the number of people registered as unemployed rose to 4.67 million in the three months to February, a surge of more than one million from a year earlier, data from the Turkish Statistics Institute showed.

The jobless rate was up from 13.5 percent in the previous period ending in January, and it included a jump in youth unemployment to its highest level since at least 2005.

Tatha Ghose, senior emerging markets economist at Commerzbank, said: "The labour market is a lagging indicator and we all know Turkey is in a recession, and until that changes, unemployment is expected to go up.

"It should go up further as the recovery has not yet taken hold and will continue rising at least until July or August. It will get worse before it gets better," Ghose said.

In the three months to February, the unemployment rate among people aged 15-24 rose to 26.7 percent, its highest level since the data became available in 2005.

Overall unemployment last stood at 14.7 percent in the February-April period of 2009.