By. Justin Mays
Investors see
opportunity in Turkey since new leadership at the Turkish Central Bank has
enacted economic reforms with encouraging results. On February 18, Central Bank
Chief Naci Agbal kept the country’s main policy rate at 17 percent, after having
moved it up by 6.75 percentage points to arrest the rampant inflation that had
worried foreign investors and pushed Turkish citizens to sell their Lira for
hard currencies. Appointed in November 2020, Agbal has implemented policies
contrary to those of his predecessors who, in line with President Recep Tayyip
Erdogan’s preference for credit-fueled growth, had kept rates low even when inflation
surged.
The former Central
Bank Chief, Murat Uysal, was unable to stop the fall of the Turkish Lira which
lost more than 40% of its value against the Dollar under his tenure. In
contrast, Agbal’s approach is managing inflation and is rebuilding the bank’s
credibility making the Lira more attractive to foreign investors. Inflation
continues to accelerate but is expected to slow in April. It rose 15 percent in
January 2021 over January 2020. This surpassed the central bank’s official
target of 5 percent however interest rates are 2 percent higher offering
investors inflation-adjusted yields that rank among the highest in emerging
markets while, in comparison, developed market debt is near historic lows.
Agbal's monetary tightening has lifted Turkey's real rate from negative
territory to 2.4%, compared to an EM average of 0.5%.The central bank may begin
to slowly reduce interest in line with disinflation rates by April and will
rebuild its foreign currency reserves. Agbal’s orthodox approach to monetary policy and
his ties with leadership are building investor confidence and since his
appointment the Lira has soared by 20 percent, by far the best in emerging
markets making this a favorable time to invest in Turkey. While Agbal continues
to stabilize inflation, buying properties in Turkey is one of the easiest ways
to enter the market while exchange rates are favorable.
“I hope we will
reveal our determination to grow our country once again by announcing our
economic reform package,” Erdogan stressed at the AKP’s Istanbul provincial
congress on Feb. 24, 2021. In mid-March Ankara will be sharing their new plan
to further strengthen the economy.
