If you are looking at investing in Turkey, you are probably asking yourself if the latest moves by President Recep Tayyip Erdogan will create a more stable or less risk-averse investment environment.
Earlier this month, President Erdogan announced several economic reforms that included a more secure climate for foreign investment backed by an effective and efficient judicial system. Justice Minister Abdulhamit Gul said at a panel in Ankara on Nov 12 that “One of the indispensable aspects of an economy that produces and creates jobs is legal predictability. Legal predictability and economic predictability are directly proportionate to each other.”
What does this mean for investors in Turkey?
Simply put, Turkey appears to be taking the decline of the Turkish Lira during the Covid-19 period seriously. As the country looks to strengthen the Lira and its risk perception to foreign investors, more internationally recognised standards of practice are being put in place to ease the perception to foreigners who were “scared” during the reign of the previous Finance and Economy Minister.
Erhan Aslanoglu, a professor of economics at Piri Reis University stated that "During the pandemic period, the financial institutions had introduced a series of regulations that increased foreigner's risk perception."
With these irregular practices being stamped out and more accepted practices returning, perception abroad has already significantly improved. Turkey’s Credit Default Swap (CDS) rating has dropped 118 basis points in the last few days alone, easing pressure on Turkish finance and investment markets.
How will Turkey improve its perception to pre-Covid 19 levels?
First, Turkey must begin by being more transparent and communicative in the country’s economic operations, which has been vowed by the new Economic and Finance Minister and President Erdogan himself.
Second, Turkey must make the investment climate for foreigners more welcoming, possibly by offering greater incentives and opportunities along with the newly promised judicial balance and support. Lastly, Turkey's Central Bank must implement tighter operational principles in line with international standards. All of which in the last few days has been promised by the new Finance Czar.
These initial remarks have appeared to ease some of the worries of foreign investors as the lira gained back 4.6% on the dollar following the announcement, making it the single most positive currency swing in a tumultuous 2020.
The signs and indicators are pointing to a rapid economic recovery with balanced and predictable economic policies. As perception of investment in Turkey increases, this will have continual positive payoffs to those who invested in Turkey between July and November of this year, especially as the Lira continues to gain strength daily.
Knowing the Lira is strengthening, at Property Turkey we're expecting a mad-dash of investors looking to capitalise before they are priced out of the market during this rise.
Look for the return of the mid-market buyer as stability and currency normalisation occurs. Also look for the luxury buyers along Turkey's south coast return in numbers; in particular: Bodrum, Kalkan, and Fethiye.
Nothing stimulates a market more than stability and opportunity, both of which Turkey looks primed to deliver moving into 2021.
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