ISTANBUL (Reuters) – President Tayyip Erdogan’s losses in local elections have dented investors’ hopes that Turkey will adopt painful reforms they say are needed to stabilize the economy as he moves to shore up his political base.
Erdogan’s Islamist-rooted AK Party (AKP), in power nationally since 2002, lost control of the capital Ankara and the business hub Istanbul in the March 31 polls, initial results showed. The AKP has demanded recounts in both cities.
Finance - Minister - Berat - Albayrak - Erdogan
Turkish Finance Minister Berat Albayrak, who is Erdogan’s son-in-law, is expected this week to announce to jittery foreign investors the structural reforms he hopes will revive an economy plagued by high inflation and a fragile currency. State-owned Anadolu news agency said the announcement would be on Wednesday.
After a currency crisis last year that saw the lira lose nearly 30 percent of its value, economists say Turkey needs to make long-term commitments to increase exports, relieve debt-laden companies and free up the central bank to do its job.
Erdogan - Vote - Election - Night - AKP
Erdogan, who campaigned hard ahead of the vote, said on election night the AKP would now refocus on the economy.
But many analysts are skeptical about the chances for a comprehensive reform plan, especially after the elections, and fear the AKP will opt instead for short-term stimulus measures that fail to tackle, and may even exacerbate, deeper weaknesses.
AKP - Base - Measures - Measures - Inflation
“The AKP base want more pro-growth measures, they want more fiscal measures, they want lower inflation. It is exactly what they (the AKP) did before the elections and it will have to continue if (Erdogan) wants to remain popular,” said Guillaume Tresca, senior emerging markets strategist at Credit Agricole.
“I would not expect concrete reforms, it will be just words.”
Heart - Turkey - Malaise - Years - Funding
At the heart of Turkey’s economic malaise is years of cheap foreign funding that drove a construction-driven boom. Once the lira collapsed, firms could not pay off debts...
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