The economic projections in the reports published by International Institutions about the upcoming Turkish elections are getting sharper.
According to some analysts, keeping TRY-denominated assets will be risky if the ruling party wins, since they will not change their monetary policy, while others say if a new government is elected, investing in foreign currency will bring good profits.
There has been a noticeable interest in both Turkey’s foreign currency bonds and stock, especially in banks and financial stocks. As usual, I say “One swallow doesn’t make a summer”. Because no matter which government comes to power, it will not be possible to drastically increase policy rates.
On the other hand, I think it would be a good first step and a dynamic helping hand for the markets to raise the policy rates up to 20%. This first step should be followed by a judicial reform, tangible changes to provide more civil rights and liberties, a revision of the legislation in line with market rules and finally readopting the floating exchange rate regime. These policy changes would definitely bring positive effects in the medium term.
“Encouraging Instead of Pushing…”
Obviously, foreign investors do not want to invest in a country where economic regulations are changed too often, which inevitably leads to a constant lack of savings and currency crises. Therefore, it is any government’s duty to avoid interventions that will perpetuate such predicaments. As I have stated in my previous reports, whenever rules are bent, administration tends to get comfortable too fast, and in the end, it is always the people who have to pay the price for this lack of care, attention and control.
In the next process, encouraging, not forcing, the markets to comply with new regulations will ensure that the markets find their balance without the government needing to intervene too much. Margaret Thatcher once said:
“Governments should act in a way that inspires the sense of doing good in people so that the evil is drowned out. Trying to create goodness by force will eventually bring more trouble.”
In other words, she meant to say that it is unlikely that a government, which is constantly suspicious of its citizens and control them instead of controlling things, will produce anything good, valuable or useful.