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Turkey's political moves rattle markets

Friday, May 06, 2016 - 01:27

Turkish Prime Minister Ahmet Davutoglu's departure raises hard questions about the government's ability to tackle slowing growth and pass the reforms that many investors are demanding. Sara Hemrajani reports.

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A shake-up in Ankara has rattled financial markets. The Turkish lira tumbled against the dollar, on the announcement that Prime Minister Ahmet Davutoglu is stepping down. Both Davutoglu and President Erdogan have been quick to reassure investors. They promise continued stability and a strong government. But many are still unconvinced about Erdogan's plans for a more powerful executive office. SOUNDBITE: Jane Foley, currency strategist, Rabobank, saying (English): "Markets are very concerned about the political momentum within Turkey, and certainly who could be replacing the prime minister." Under the rule of the AK Party, Turkey has become one of the top emerging economies. But growth fuelled by credit and domestic demand is starting to run out of steam. A drop in tourism following a series of militant attacks, and a rift with Moscow, have also made a dent on GDP. SOUNDBITE: Jane Foley, currency strategist, Rabobank, saying (English): "If investors remain sceptical about the political situation then they would have a dearth of inward investment. Now we have a significant current account deficit in Turkey, this is why the Turkish lira is so vulnerable to political news. Now if we did have the lira selling off significantly, then that would increase inflationary pressures." The World Bank says Turkey's expansion will cool to 3.5% this year. The prospect of a third election in less than 18 months now unlikely to boost confidence.

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Turkey's political moves rattle markets

Friday, May 06, 2016 - 01:27