Turkish capital controls out of the question: Deputy PM Şimşek
ANKARA - Anadolu Agency
AA photoTurkish capital controls “are out of the question,” the country’s deputy prime minister has said.
“I have two simple messages to speculators: Turkey to maintain sound macroeconomic policies,” Mehmet Şimşek tweeted late July 19, adding: “Capital controls are out of the question.”
A country can use capital controls to order its banks to impose strict limits on daily withdrawals and foreign country transfers of cash.
“[Turkey’s] banking sector is well capitalized and has strong asset quality,” Şimşek also tweeted.
The country’s top economic officials have been trying to reassure investors that the failed coup attempt on July 15 will not cause permanent damage to the economy.
Turkey’s Central Bank acted on July 17 by cutting commissions on daily liquidity options for banks to zero and providing unlimited liquidity to maintain financial markets following the coup bid.
It also said it would increase the daily foreign exchange auction limit from $50 million if necessary.
“Our country’s macroeconomic fundamentals remain solid. We are taking all the necessary measures,” Şimşek said on July 17.
Economy Minister Nihat Zeybekci also tweeted that the economic foundations of the country were “solid.”
“Despite all undemocratic attempts, our economy will continue to function flawlessly,” he added.
Timothy Ash, a London-based strategist at Nomura International, told Anadolu Agency on July 20 that economic growth in Turkey could possibly be affected by the failed coup.
But Ash said Turkish growth has been remarkably resilient so far, a reflection of underlying strengths such as a sound banking system, strong public finances and demographics.
Rule of law ‘matters for investors’
The GDP increased by 4.8 percent in the first quarter of 2016 compared to the same period last year, making Turkey one of the fastest growing economies in Europe and among Organization for Economic Cooperation and Development (OECD) members.
Ash said that global investors were nervous. “I think the rating and application of the rule of law is important for these investors,” he said.
“These investors want to see domestic political tensions and security risks moderate. It is also important that the Central Bank and the Finance Ministry show prudence in terms of policy.
“I think it would be good to see a recommitment to Şimşek’s structural reform agenda with some specific long-awaited reform laws on investment and the economy rolled out,” Ash added.
Andy Birch, senior economist at IHS Global Insight, said the medium- and long-term economic outlooks have not been significantly impacted but in the short-term, economic growth will suffer in the wake of the failed coup.
“Investment activity in the third quarter will likely be weaker than it would have been otherwise, as potential investors wait until the fallout of the actions – market instability, shifting government policies – are clearer,” Birch told Anadolu Agency.
“While we do not anticipate there will be a complete evaporation of foreign investors into the country, gross inflows will drop significantly in July and August. Top officials have been aggressively attempting to calm investor worries, but until the course of government policy is better known, investment will shift away from the country.”