Investors’ concerns ease over future of Turkish economic team
Nuray Babacan/Turan Yılmaz ANKARA
Deputy PM Babacan (4th R) poses with members of the ‘B-20 Steering Committee,’ which is made of Turkey’s top business leaders, after a meeting on Aug. 20. AA photoInvestors’ eyes have been closely searching for clues regarding the structure of the new Cabinet, expected to be announced today by President-elect Recep Tayyip Erdoğan, but concerns over the possible removal of key stabilizing figures have been partially eased with recent statements from senior ruling party officials.
Expectations that current economic management members will stay in their posts have been strengthening, particularly after outgoing President Abdullah Gül’s remarks suggesting that Foreign Minister Ahmet Davutoğlu was likely to be appointed as prime minister.
Local and foreign investors and analysts have been particularly concerned about the position of Deputy Prime Minister Ali Babacan and Finance Minister Mehmet Şimşek, who are both seen as guarantors of Turkey’s economic stability.
According rumors circulating in Ankara, advisers and party members close to Davutoğlu have already begun to lobby to keep Deputy Prime Minister Ali Babacan at the top of Turkey’s economic policy decision-making.
Even some party figures, who have been implicitly criticizing Babacan and implying that he is linked with Islamic scholar Fethullah Gülen, have adopted a more positive attitude about the deputy prime minister since seeing the impact of worries over his absence in the Cabinet, daily Hürriyet has learnt.
“Of course the decision will be up to Erdoğan and Davutoğlu, but in the new Cabinet, which is expected to be formed at the beginning of September, no changes are expected with Babacan and Şimşek or other economic portfolios,” one senior AKP official told Reuters.
Despite abating concerns over the future of the Cabinet, Turkish stocks and the lira weakened yesterday, in line with emerging market peers, as investors awaited policy signals from the U.S. Federal Reserve.
Istanbul’s main share index was down 0.63 percent at 78,764 points in the morning trading after rising 2.5 percent on Aug. 19. It was underperforming the broader emerging markets index, which was down 0.1 percent.
The lira was also weaker, trading at 2.1713 to the dollar versus 2.1645 of the late hours of Aug. 19.
“The prime minister is expected to be officially announced tomorrow but uncertainty over the next economic team in the Cabinet will remain until [the appointment] becomes official on Aug. 27,” said Erkin Işık, a strategist at TEB-BNP Paribas.
“However, recent news suggests that the economy team will remain intact, which could lead the lira to reverse some of its recent underperformance,” he added.