Financial Markets Confused After Actions Taken by Official Bodies
The recovery in the Turkish markets was replaced with a sharp fall before the closure of the Istanbul bourse, in parallel with the European markets. PM Erdoğan calls on citizens to avoid ‘irresponsible spending’
The lira keeps on losing against the US dollar and euro. Turkish markets breathed a sigh of relief on Wednesday following disclosure of an action plan that aims to address global developments, announced after Turkey’s top Economy Coordination Committee meeting and the pledge by the U.S. Federal Reserve to keep interest rates near zero for at least two years late Thursday.
Still both the Turkish currency and the Istanbul bourse experienced a sparp fall before the closure on Friday.
The lira weakened 0.9 percent to 1.7721 per dollar, bringing losses to 8.4 percent in the quarter to date. That maked the lira the worst-performer among 178 global currencies.
Bourse loses 5 percent
The benchmark ISE National 100 dropped 5.01 percent, to 50,308. touching its lowest close since February.
The market trauma that shook both Turkish and global markets following a downgrading of the U.S. economy by the rating agency Standard & Poors will not have lasting effects on the Turkish economy, a statement by the Prime Ministry following the committee meeting, read on Tuesday.
The developments in the global economy “are not expected to have long-term negative effects on the Turkish economy and financial markets,” according to the written statement.
“We will not allow the crisis psychology to hold us captive,” Turkish Prime Minister Recep Tayyip Erdoğan said while speaking to members of his party in Ankara on Wednesday. Erdoğan urged Turks to avoid irresponsible spending and prefer investment in property over items such as new cars.
The coordination committee decided to control growth, current account deficit and fluctuations in the market through an action plan revealed in the Tuesday statement. A set of other measures were included in the action plan as well.
“This action plan is not one that can prevent effects of crisis [in global markets],” Erdal Sağlam, a Hürriyet economy columnist told the Daily News on Wednesday. Sağlam said although markets seem to be currently relieved, he expected them to be volatile in the coming days to.
The country’s top economic coordination committee attributed most of the shock in the market to the large current account deficit and stated reforms for a solution to this concern would continue.
“One cannot fight against the current account deficit [overnight],” Sağlam said. If there is an actor that might shrink Turkey’s current account deficit in the short term, that is the Turkish Lira’s depreciation against foreign currencies, he added.
Erdoğan assured Turkish people on Wednesday that the government was considering all measures to be taken in a possible double dip.
“The Turkish government must use the global crisis as an opportunity to switch to a national domestic savings oriented model of labor intensive technologies, if possible driven from public investment,” Erinç Yeldan, an economics professor at Bilkent University, told the Daily News in a phone interview. It is time for Turkey to pass to a new paradigm, he added.
August 10, 2011
SOURCE: HURRIYET DAILY NEWS
