Turkey's New Finance Supremo Seeks To Win Over Sceptical Markets
Umer Jamshaid 4 days ago Thu 12th July 2018 | 08:33 PM
Turkey's new finance minister, the son-in-law of President Recep Tayyip Erdogan, on Thursday sought to reassure sceptical financial markets after his surprise appointment prompted a new battering for the lira and Turkish assets.
Istanbul, (UrduPoint / Pakistan Point News, app - 12th Jul, 2018 ) :Turkey's new finance minister, the son-in-law of President Recep Tayyip Erdogan, on Thursday sought to reassure sceptical financial markets after his surprise appointment prompted a new battering for the lira and Turkish assets.
Erdogan on Monday named Berat Albayrak, 40, the husband of his elder daughter Esra, as treasury and finance minister, in a cabinet reshuffle for his second term under a new system that hands the head of state expanded powers.
His rapid promotion from the energy ministry took many market participants by surprise, while pragmatic, market-friendly faces like outgoing deputy premier Mehmet Simsek and finance minister Naci Agbal were conspicuous by their absence.
- 'Like never before' - A key concern of markets has been the independence of the central bank, with Erdogan repeatedly urging rate cuts despite high inflation and now able to directly appoint its leadership under the new presidential system.
He said that the central bank's capacities should be widened in the pursuit of price stability. "One of the main aims of our policies in the new period is a central bank that is effective like never before," he said.
The president was quoted by Turkish newspapers including the Hurriyet newspaper on Wednesday as saying "we will see a decrease in interest rates," and warning high interest rates could hurt employment.
- 'Moment of truth' - But Albayrak said that the "fundamental priority" in the upcoming period would be fighting inflation.
"We will take steps to first bring inflation in the shortest time down to single digits and then to our target," he added.
The recent inflation figures have made a mockery of the central bank's inflation target of 5 percent.
Analysts at Commerzbank said the "moment of truth" would strike for the lira on July 24 when the central bank holds its next meeting, warning capital controls "may prove unavoidable" if it fails to hike rates sufficiently.
- 'Erdogan's Achilles' heel' - Fadi Hakura, associate fellow at Chatham House, said it was debatable if Albayrak has "the competence to placate jittery financial markets and foreign investors." He added defaults by major Turkish companies "would reverberate across the Turkish economy... and potentially lead to a crisis within the Turkish financial system." Erdogan built much of his popularity on his stewardship of the economy which helped lift Turkey from the traumas of hyperinflation and the 2001 financial crisis.
But even after his outright win in last month's presidential elections, economists warn that Erdogan needs to tackle growing imbalances in the economy.
"The deteriorating state of the economy is his Achilles' heel and the biggest threat to his currently unrivalled leadership," said Hakura.