Foreign business representatives are returning to Turkey to see if the upcoming elections will change the economic and investment climate in the country.
what’s happening in Turkey
Unorthodox political approach in the government of the President of Turkey Recep Tayyip ErdoganIn addition to lowering interest rates in the face of rising inflation, the economy became dependent on the decisions of the authorities. This has contributed to a large outflow of investors from the country over the past five years.
Opposition ahead of the current leadership, according to some opinion polls, promises to improve the situation in the financial sector. Leaders of the alliance opposing the president will revert to the traditional approach to managing the emerging market economy.
Reuters writes that the developing situation in Turkey’s political arena on the eve of the 14 May elections attracted investors and representatives of the foreign business world to the country. This is also facilitated by the lifting of restrictions related to the coronavirus pandemic, which has long hampered many business trips around the world.
interests of foreign creditors
International financiers want to understand who will win after the elections and what the state development program will be. According to media reports, leading international credit institutions are already organizing trips to Istanbul and Ankara.
The source said that Spanish lender Banco Bilbao Vizcaya Argentaria (BBVA) held a business meeting in Turkey for its clients with approximately $1.5 trillion in debt in emerging markets.
“If the opposition wins, there will be a big increase in the interest rate and it will happen soon,” the source says.
French bank BNP Paribas, showing interest in Turkish Economy Bank, said that it will meet with company representatives in April.
two-way communication
However, Turkish officials are also making visits. Therefore, representatives of the Turkish Ministry of Finance and Energy visited London to discuss new “sustainable” bonds with financiers. According to the executive of investment firm Abrdn Victor SzaboThe bond plans of the Turkish authorities present at one of these speeches are likely to be almost fully formed. This means Ankara may try to sell them before the elections. Analysts estimate that Turkey will need to borrow $5 billion in 2023 to close its budget deficit.
Currency turmoil in the republic caused many foreign players to sell lira-dominated government bonds. Currently, the share of foreign ownership in the Turkish market is less than 1% compared to 25% five years ago.
Expectations and expectations
Some analysts think that the opposition’s victory in the elections could lead to stability in the Turkish national currency. However, there are also those who expect the economic situation to worsen. In addition, the need for restructuring under the direction of the Central Bank, regulators and ministries will complicate the stability of the Turkish financial market.
According to an anonymous foreign investor who plans to visit the republic in the near future, businessmen will hold talks with representatives of the Central Bank, as well as listen to the opposition.
“If a leader emerges among emerging markets in 2023, it will be Turkey,” the investor says.
British bank Citi said that it held two-day business meetings in Istanbul at the beginning of March for its customers who want to invest in bonds and stocks. According to the representatives of the organization, although the atmosphere in Turkey is tense, there is an air of positive changes in the future.
In connection with the upcoming elections in the country, not only Western but also Gulf investors are considering the possibility of a direct financial injection into the Turkish financial sector. The Central Bank of the Republic did not comment on the meetings with representatives of the international business world.
Turkey in crisis
Turkey is currently experiencing serious problems in the economy. In July last year, inflation rose to 85.5%, the highest since September 1998. The value of the national currency against the US dollar fell by more than 44% in 2021 and by more than 30% in 2022. The state does not have enough foreign exchange reserves to control the exchange rate with interventions. In addition, the Central Bank of the Republic of Turkey lowered the key interest rate, which is 8.5% today. This goes against the basic principles of generally accepted monetary policy when it requires boosting the economy by increasing high inflation rates.
It is also important that the Turkish economy is heavily dependent on imports. Rising world prices cause producer costs to increase. In 2022, the prices of goods produced in the country increased by 115%.
We must not forget the consequences of the powerful earthquakes that actually destroyed the country on February 6. Damage from them is estimated at about $100 billion.
Source: Riafan
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