Turkey’s economy will be safe under a coalition - analysts
Fears that Turkey’s economy could crumble under a coalition are unfounded, say financial analysts.
In the 1990s, arguing coalition parties fuelled hyperinflation and lending that ultimately led to a financial crisis. Fears that history might repeat itself have led to the lira hitting all-time lows after Sunday’s election.
A recovery since the post-election days has underscored the optimism that a coalition government might not be such a bad thing - and at the very least, more successful than its predecessor 20 years ago.
Voters ensured that the ruling AK Party no longer had a supermajority - as well as thwarting President Recep Tayyip Erdogan’s ambitions for an executive presidency. This can only be a positive note for the long term, says a financial manager.
Bryan Carter, who manages hundreds of millions of dollars of emerging-market debt at Boston’s Acadian Asset Management, says recent political developments are positive for long-term economic management.
“Checks and balances had been weakened over time by the concentration and tenure of power. We see a reversal of these trends on the back of the vote.”
Michael Harris at money management firm Renaissance Capital predicts that the election result and any future coalition will reduce financial risks. “A functioning coalition will go a long way to reducing the medium-term market and economic risks associated with a consolidation of President Erdogan’s power.”
In a report this week, Harris recommended buying Turkish stocks. “Turkey has matured enough economically to withstand the inefficiencies of a coalition.”
The ruling AK Party is currently trying to reach an agreement with one of the other three parties represented in parliament. Opposition leaders have all said that they will consider a partnership only with conditions that will temper Erdogan’s power.
Emerging market specialist Phoenix Kalen, at Societe Generale in London, says the election result lends “a higher likelihood to a more inclusive government and greater monetary policy independence.”
“Easing political uncertainties may also revive delayed investment and private consumption.”
Economic growth exceeds expectations
Economic growth in Turkey beat all expectations in the first quarter as government spending and domestic demand spiked.
Gross domestic product expanded by 2.3 percent in the first three months of the year, outpacing the 1.7 percent forecast by Wall Street Journal analysts.
Turkey’s positive performance helped the lira gain over the last few days, rising 0.7 percent against the dollar.
The better-than-expected result has given the Turkish economy a well-needed boost as jostling for a coalition causes economic uncertainty.
Analysts are urging a fast resolution to the political situation, which will increase the chances of a stronger growth performance.
Finance Minster Mehmet Simsek said the first quarter result was “positive”, saying all indicators pointed toward further growth in the second quarter.
“The Turkish economy’s fundamentals are strong. Political uncertainty shouldn’t last long,” he tweeted from his account, adding that Turkey’s expansion over the past few years wasn’t without obstacles.
G-20 economies plan to boost global growth, increase Islamic finance awareness
The world’s leading economies have nailed down their commitments to improve global growth under a G-20 plan - and we should see the green shoots of these efforts by the end of Turkey’s G-20 presidency this year, said a Turkish official.
The Brisbane Action Plan, agreed upon last year by the G-20 group in Australia, outlined measures to raise gross domestic product and create millions of new jobs for G-20 countries over the next five years.
Turkish G-20 official Ayse Sinirlioglu told Reuters that each country has chosen between five and eight commitments
“If we can achieve this goal in five years ... we will be adding 2 trillion dollars to world economic output, which is almost equal to the size of the Indian economy,” she told Reuters in an interview.
The first meeting under the Turkish presidency, held in February, was mired in doubt, with an uncertain outlook for global growth. Turkey has made “inclusiveness” key in this year’s presidency, seeking to reduce inequality as well as giving low-income nations more of a voice.
The G-20 finance ministers are due to meet again in September in Ankara ahead of the G-20 leaders’ summit two months later.
Islamic finance plays “vital role”
A senior Turkish finance official says Turkey is aiming to make Islamic financial services a G-20 priority.
Deputy Undersecretary of the Turkish Treasury Burhanettin Aktas said at a meeting at the Islamic Development Bank that Turkey strongly believed the role of the Islamic finance industry in infrastructure and small-medium-enterprise financing was crucial.
“In order to utilise this high potential, many countries are setting up an enabling environment for Islamic finance products after the 2008 global financial crisis,” Aktas said. “Some of the non-Muslim countries around the world are trying to position themselves as Islamic financial hubs. In addition, the IMF and the World Bank have a real interest in Islamic finance”.
He added that Turkey has one of the highest growth potentials for Islamic financial services and is aiming to increase the share of Islamic financial assets in the banking sector, by way of developing new products, establishing a state-owned Islamic bank and is planning to open more.
Akbank becomes Turkey’s most valuable brand
Valued at US$2.5 billion, Turkish banking giant Akbank has been ranked as Turkey’s most valuable brand by Brand Finance, overtaking last year’s first placeholder, Turk Telecom.
Akbank, whose largest shareholders are the Sabanci family, increased its value from US$2.19 billion to $US2.44 billion this year.
Runner up Turk Telekom was valued at $2.47 billion, Isbank at $2.44 billion and Turkish Airlines at $2.19 billion.
The Brand Finance report showed that Turkey’s top 100 brands were worth between USD$25-35 billion.
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