WHAT NEXT FOR TURKEY'S ECONOMY? In June 7’s Turkish general election after 13 years in power the ruling Justice and Development Party - the AKP failed to win the majority necessary to govern alone. With coalition talks set to get underway citizens, businessmen and investors are all curious to find out what awaits the Turkish economy in the near future. Both local and foreign economists warn that not being able to form a coalition within 45 days would have a negative impact on the economy. TURKISH MARKET REACTION Markets like stability. As soon as there are signs of uncertainty markets react negatively. Predictably, in Monday’s opening session domestic markets were shaken by the election result. The Turkish lira fell by about 5 percent against the dollar reaching record high of 2.80 to the dollar. (dolar grafik) However the Turkish Central Bank attempted to prop up the currency by cutting interest rates on foreign exchange deposits which had a positive effect and stabilised the lira. Although the central bank adjusted its policy slightly, the bank’s high interest rates are still affecting investments. Following the election, in order to protect themselves from the weakening Turkish lira Turkish banks increased their mortgage rates, which directly affected housing credit. TURKEY'S 2023 VISION Owing partly to the AKP government’s ambitious goals the Turkish economy has been a rising star in both emerging and developed countries. Turkey’s economy was the fastest growing in Europe in 2011 and became the second fastest growing economy in the world after China. However like every economy the Turkish economy has its problems as well. A high current account deficit, high inflation, local production being under its potential may be considered among the most acute structural issues in the country. However, the Turkish government has been taking important measures to overcome these problems permanently. “Vision 2023” envisages Turkey becoming one of the top 10 economies in the world in 8 years, by making economic, social and infrastructural improvements. COALITION TALKS AND THE ECONOMY Now all eyes are on Turkey’s upcoming coalition talks. Economists have pointed out the importance of ending the political uncertainty of the period as soon as possible. Since the global outlook is not very bright political and economic stability in Turkey is of the utmost importance. Economists believe if political ambiguity prevails in the mid term, macroeconomic data may begin to be affected. Another issue is the need for structural reforms, which have been partially implemented. Since the AKP government initiated several long term reforms of the economy, it is feared a coalition without the party may disrupt these structural changes. Facebook: https://www.facebook.com/trtworld Twitter: https://twitter.com/trtworld

• published: 13 Jun 2015
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