'Grow with the country' expert urges investors as lira climbs

Thanks to a shake up in Turkey's monetary system, the future looks bright for property investors, explains real estate expert Cameron Deggin. 

The Property Turkey director says the appointment of new Central Bank governor Naci Agbal and new finance minister Lutfi Elvan was a significant move in more ways than one.

"These two new appointments signalled a positive stance to international markets that Turkey wants to strengthen the lira and the economy," Deggin said.

 Elvan's replacing of Berat Albayrat as finance minister was significant, Deggin explains. Albayrat is President Erdogan's son in law, and Erdogan had drawn criticism for the appointment, Deggin said.

 And the criticism was founded. "Over Albayrat's period as finance minister he didn't really show a very convincing front in terms of finance."

However, his replacement looks promising, Deggin said. And this has been born out in the economy: in the three months since the new appointments, the lira has recovered, growing by 23%.

The shake up also signalled a move away from a monetary system dominated by Erdogan, who has long favoured low interest rates, Deggin explains.

"The main signal Turkey is giving to international markets is that Erdogan's influence is not as strong, and he is no longer meddling with interest rates. This shows the independence of Turkey's Central Bank as well as its monetary mechanisms."

Despite pressure from Erdogan, central bank governor Agbal has announced that the bank intends to move ahead of the market, which could include rapidly raising interest rates if there's any sign that inflation, which is now 15%, might start to climb.

“It does not seem possible to put interest rate cuts on the agenda for a long time this year,” Agbal said this month, adding that consumer prices will most likely rise for a few months  before dropping to the bank’s forecast of 9.4% by year-end.

This will have a positive impact on the Turkish lira, Deggin explains. "The higher the interest rates, the higher the deposits received, which in turn strengthens the currency."

Healthy growth forecast

Earlier this month, HSBC revised its 2021 growth forecast for Turkey, doubling its 2.1% prediction to 4.2%.

Wall Street bank JP Morgan also raised its forecasted figure from 3.3% to 4.6%. 

When you add the positive outlook to the financial shake up, it's no surprise the lira is strengthening, Deggin says.

For property investors, he has a short, sharp message: "It's time to invest: now."

"Over the next three or four years Turkey will prosper. Come in now and grow with the country."