Uncertainty Is the Worst of All…

All domestic and foreign investors in Turkey are curious to know:

  • whether exchange rates will remain calm
  • when will inflation start trending steadily downward?
  • when will the elections be held and what will be their side effects?

Before answering, I would like to make something clear for the people who are asking these questions, “I don’t have backdoor conversations. I tell government members and other people the same things I tell you”.

Interventions that went a little beyond the free-market approach have helped exchange rates remain calm, in which the Central Bank and the Public Banks played an important part. Private banks had no objections to these interventions either because their profits increased as the interest rates remained low. I am projecting that the inflation will be between 45-50% this year and 25-30% next year, but I may revise it upwards due to the possible impact of ever-increasing current account deficit on the exchange rates.

“Will Things Remain the Same Until Elections?”

Of course, everyone wonders whether these challenging economic conditions in Turkey will have political consequences. President Erdogan’s political experience should be taken into account as well. In this country, successful moves in foreign policy never created a big vote potential in domestic politics, but the deterioration in the economy has always been a very unpleasant for the governments. Therefore, my expectation is that the Government will try to keep the problems under control until the elections, which is indeed not an easy thing to do.

For foreign investors, the best time to buy is now. Because after the elections, when the economy officials pick the things up where we left off, Turkish lira will most probably appreciate. I am aware that foreign capital has not been flowing steadily in the country for a long time now. However, there still are several foreign companies which have been operating in Turkey since the 19th century. Apparently, those who know and see the potential stays here.

Uncertainty is the most stressful feeling for everyone. And it is quite unlikely that it will disappear before the elections. So, investors should make their plans accordingly and take a solid position in order to benefit from the post-election climate in Turkey.