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Oct 11 2018

Turkey, South Africa not credible on economy – LSE professor

Turkey and South Africa are the least convincing when it comes to economic policy, a top scholar from the London School of Economics said.

The governments of both emerging-market countries appear unwilling to implement policies that are credible, said Lutfey Siddiqi, visiting professor-in-practice at the London School of Economics.

 “In the case of South Africa — or Turkey certainly — it feels like (they are) kicking and screaming and dragging a change … Do they really want to do it or not?" Siddiqi told CNBC's "Squawk Box Europe" on Wednesday.

"Credibility will be built based on action, not just on rhetoric," he said.

The price of Turkish assets has slumped this year – the lira has lost almost 40 percent of its value against the dollar – as investors fretted over political interference in central bank policy, an overheating economy and a spat with the United States over imprisoned Americans.

While investors welcomed the central bank’s decision last month to hike rates to 24 percent from 17.75 percent to arrest the lira’s decline and surging inflation, it was a belated move and actions by the government since have rekindled concerns about the country’s policy direction.

Turkish President Recep Tayyip Erdogan appointed a new economic advisory council filled with loyalists and lacking top economists, while his son-in-law, Treasury and Finance Minister Berat Albayrak, announced a questionable plan to cap inflation, which has jumped to almost 25 percent.

Concerns in South Africa have heightened after its finance minister Nhlanhla Nene resigned on Tuesday over links to corrupt individuals. Nene was replaced by a former central bank governor, the fifth such change since 2014.

"I remember in 2015, (South Africa) had three finance ministers over a span over four days so while we welcome the appointment of a new finance minister, credibility is not built in a day," Siddiqi told CNBC.