Economists confident in Turkish economy after elections

ANKARA - Anadolu Agency

Economists and other experts have told Anadolu Agency that investor confidence in Turkey will not flag despite potential political instability after June 7’s general election.

The election saw four parties earn enough votes to enter the Turkish parliament, sparking speculation about a return to coalition government or a second, snap election.

“Business will not lose confidence in the Turkish economy despite the election results,” said Raphael Israeli, a political scientist at the Hebrew University in Jerusalem.

“The election results are clear evidence of the vitality of Turkish democracy and will support investor confidence,” said Christopher Dembik, an economist with Saxo Bank in Paris.

“We see it as an affirmation of the strength of Turkish democracy,” said Christian Schulz, a senior economist with Berenberg Bank in Hamburg. “But much will depend on what the new government devises in terms of economic policy. There are opportunities, but they should not be missed.”

Israeli said international relations with Europe and the West would not be greatly changed after the election.

“There will be concerns about instability, and about the new government’s ability to manage the economy. But Turkey will remain a close ally of the United States, where President Barack Obama continues to see the country as a cornerstone.

“Relations with Europe will be more problematic, but should not see a radical change,” he said.

“What is critical is the evolution of the Turkish economy itself – can it return to growth? Investors will be watching these issues,” Israeli said.

Dembik warned that an outflow of funds from the country is possible should a period of political instability ensue.

“However, we expect a stable government to emerge. Despite the results, it is too soon to say that it is the end of the AK Party’s golden age because there is no credible alternative among the opposition. The charismatic co-leader of the HDP [pro-Kurdish Peoples’ Democratic Party], Selahattin Demirtaş, was the big surprise of the parliamentary campaign, but he has a long way to go before people and other political parties see him as potential prime minister,” Dembik said.

“After 13 years in power, it is logical that the Justice and Development Party is losing ground but the opposition is not strong enough to represent a serious threat to President [Recep Tayyip] Erdoğan. Clearly, there is not much room for political evolution in the short term,” Dembik said.

“Our macroeconomic outlook is still positive for Turkey because of the combination of low oil prices, decelerating inflation and a weakened Turkish lira which supports exports. Inflation remains over the target of the Central Bank in April at 7.9 percent year-on-year, but it should move lower in the second part of the year,” the Saxo Bank economist said. “This economic situation should support export and domestic demand in 2015.”

The Turkish economy should remain strong, in the long term, Schulz said. “The government must take advantage of its chance to actively manage the economy, regardless of its political composition.”