“Opposition victory could spark 'second honeymoon' with the West”
Renowned British economist Timothy Ash has disclosed that Turkey in recent years has experienced a massive outflow of $120 billion in foreign institutional investments due to the government's economic policies and added that if the opposition party emerges victorious in the upcoming elections, it could herald a "second honeymoon" period with the West, as foreign investments are expected to return.
Kemal Kilicdaroglu, the opposition's joint presidential candidate, has repeatedly stated that if he comes to power, he will recover the $418 billion “stolen” from the Treasury, referring to tenders of big projects given to companies that are politically close to the ruling AKP (Justice and Development Party) and there is speculation that foreign investors will regain confidence in the country after the elections.
Confirming this claim, Timothy Ash, the senior emerging markets strategist at Bluebay Asset Management based in London, said in an interview with Turkey’s Cumhuriyet newspaper that if Kılıçdaroğlu wins the elections, Western financing will flow back into Turkey.
Ash pointed out that foreign institutional investors' investment in the market has decreased from $140 billion to $20 billion, citing lack of confidence due to monetary adjustments in Turkey. He continued:
"They do not have confidence due to the negative indicators for Turkey and the impression that the country is constantly on the brink of crisis. It is quite challenging to advocate for investing in Turkish lira-denominated assets in this environment."
He added: “A significant amount of foreign capital will flow into Turkey. The opposition will have the wind of investor sentiment at its back. Returning to Orthodox policies in fiscal rules is crucial. However, my concern is whether a coalition of six parties will bring political stability to the country."
Ash also evaluated the possibility of President Erdoğan winning:
"First of all, the Turkish lira will depreciate. The Central Bank will have to raise interest rates. There will be a significant drop in the market value of the currency. There may be further capital outflows. The government will face difficulties in the balance of payments in a short period of time. They may seek a large external loan. Gulf countries may support them, but they may also demand a return to Orthodox policies."