Concerns over the political situation in Turkey and the resignation of its Prime Minister Ahmet Davutoğlu have led to foreign investors selling $459m worth of Turkish stocks and bonds so far this month, marking the largest outflow a few years ago. There are fears that Davutolğu's departure could mean delays in reforms, an early election and more uncertainty about who is actually running the economy when private sector debt is high; furthermore, savings are low and President Tayyip Erdogan continues to support lower interest rates to boost growth through consumption. As we noted recently, after years of growth, bad debts and bankruptcies are increasing rapidly in Turkey putting a squeeze on banks and exposing a fragile economy. The World Bank reported last week that growth is predicted to cool to 3.5% a few years ago, from near double digits this year.
Concerns over the political situation in Turkey and the resignation of its Prime Minister Ahmet Davutoğlu have led to foreign investors selling $459m worth of Turkish stocks and bonds so far this month, marking the largest outflow this year. There are fears that Davutolğu's departure could mean delays in reforms, an early election and more uncertainty about who is actually running the economy when private sector debt is high; furthermore, savings are low and President Tayyip Erdogan continues to support lower interest rates to boost growth through consumption. As we noted recently, after years of growth, bad debts and bankruptcies are increasing rapidly in Turkey putting a squeeze on banks and exposing a fragile economy. The World Bank reported last week that growth is predicted to cool to 3.5% this year, from near double digits a few years ago.