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Jan 22 2019

Investors optimistic about Turkish economy despite currency crisis – Financial Times

International investors who met to discuss the Turkish market at an event in Manhattan last week were positive about the country’s economic future and not deeply concerned about its political climate, journalist Colby Smith wrote in an article for Financial Times.

Around 30 managers and analysts from firms including Goldman Sachs and Macquarie met Turkish executives on Thursday and Friday last week at an event in Manhattan organised by Austria's Raiffeisen Centrobank.

There, they held one-on-one meetings with the Turks and attended presentations by Turkish companies including fashion retailer Mavi and banking giant Akbank. The attendees came away with a positive impression and left discussion of politics to a “secondary” place, according to two interviewed by Smith.

The lack of interest in politics during the meeting is likely down to time constraints and the unwillingness of the Turkish executives to freely discuss the political situation in Turkey, Smith said. Freedoms have been severely curtailed in Turkey since a botched coup attempt in July 2016.

Politics, however, have played a central role in the country’s economic situation over the last year, which saw a currency crisis in which the lira’s value dropped dramatically amid a diplomatic feud between Ankara and Washington over the imprisonment in Turkey of a U.S. pastor, Andrew Brunson.

Inflation reached a 15-year high of 25.24 percent in October, partly due to Turkish President Recep Tayyip Erdoğan’s unwillingness to raise interest rates. The central bank finally did jack interest rates up in September, bringing inflation back under control, and that appears to have satisfied one investor at the meeting quoted by Smith.

"Erdogan did put pressure on the central bank, but now the central bank is performing like one," Smith quoted the U.S. portfolio manager as saying.

There are still deep concerns in Turkey over the bank’s independence, however. This month the Turkish government called an extraordinary meeting of the bank’s board in order to acquire an advance of the bank’s dividend for the Turkish treasury.

At the same time, Erdoğan is tightening his control of the country’s economy, as Smith notes.

“On Wednesday, parliament granted Erdogan the power to take any necessary measures in the face of a ‘negative development’ that threatens to undermine the country's financial system,” Smith said.

“Per the law, ‘the president is authorised and responsible for implementation of all measures beyond the powers’ of members of a newly convened Financial Stability and Development Committee. That committee will be supervised by the Treasury and Finance Ministry, the latter of which is run by Erdogan's son-in-law,” she added.