I didn’t talk about the markets yesterday. Instead, I talked about the winners and losers of June elections. So, I will be focusing on the economy today.
The week started off rather calm even though we were full of mixed feelings during the first two days. Exchange Rates and Benchmark Rate are fluctuating in a narrow band around the parity, and the reason is obvious:
Investors want to know about the new cabinet and the new course of action. As I have frequently mentioned in my previous reports, people are afraid of the possibility that some harsh statements and suggestions about a number of issues, including monetary policy management and forceful policies to make interest rates fall, made during elections rallies may be put into practice.
We should know that countries cannot possibly implement an independent monetary policy in a world without borders. Making interest rates go up or down would possibly not be a remedy either. According to some, President Erdoğan is aware of this fact, therefore he might ensure limited contact of Turkish markets with foreign markets for a successful implementation of a national monetary policy. Although I constantly assured foreign investors of the absence of such a possibility, sadly, I failed to convince them without proper assistance.
Foreign investors claim that President Erdoğan is likely to reinforce strict rules and restrictions as he would reject foreign exchange market pressure just like he rejects any tutelage of any kind. I talked about this issue over the phone with people from government circles. They said, “Be patient. Everything will be alright” when I suggested that the Government should make warm statements to soothe the markets. AK Party’s authorized boards are to convene on Friday. So, I think we might get some answers that will satisfy our curiosity.
It seems like the shaping of new economic administration will take longer than expected. Again, we may expect new developments until July 2nd, the day where the election results will be registered.
By the way, according to June capacity utilization rates released on Monday, economic activity in Turkey is still vibrant and alive. However, we can’t ignore the fact that the decline in real sector confidence index necessitates urgent statements to improve people’s expectations of future.
