Central Bank Holds 37% Rate as Manufacturing Contracts

The one-week repo auction rate remains at 37.00%. The Monetary Policy Committee kept the benchmark unchanged on Thursday. This decision aligns with market consensus. The committee cited energy costs as the primary inflation risk. Domestic demand remains weak despite the stable rate.

Industrial production declined by 0.3% in July 2026. This marks the third consecutive month of annual contraction. The monthly drop stood at 1.0%. Manufacturing output fell by 0.8% compared to June. These figures signal deepening pressure on the real sector.

Energy Costs Drive Inflation Risks

Mediterranean diesel prices exceeded $1,500 per ton. This milestone occurred on the day of the rate decision. Fuel costs are a major component of logistics. High energy prices create upside risks for inflation. The central bank expects this pressure to persist.

Monthly inflation may remain elevated in coming months. Rising fuel prices widen the inflation spread. Tight monetary conditions will likely continue. The real sector faces prolonged financial strain. This environment limits operational flexibility for firms.

Sectoral Declines Hit Manufacturing

Mining and quarrying output dropped 2.2% month-on-month. Electricity and gas distribution fell by 2.2%. The core manufacturing index decreased by 0.8%. These sub-sector declines indicate broad-based weakness. The tightening program is causing structural damage.

Liquidity Pressure Builds in Banks

Short-term high-interest loans need conversion. Firms should shift to long-term commercial credit. Failure to restructure debt increases insolvency risks. Bounced checks and protested bills are rising. Non-performing loan ratios face upward pressure.

Bankruptcy protections may become more common. The current credit structure is unsustainable. Immediate action is required to stabilize the sector. GN markets/policy (en-US) notes the urgent need for debt restructuring. The financial system remains under stress.