The president of the ruling AK party of Turkey, Mr. Recep Erdogan has requested an election for Istanbul city in spite of the fact that it has lost in local elections held last month by a narrow margin. That is the main reason why Turkey’s currency, Lira has fallen to six month low against the US dollar.
This has created trouble in front of the Turkey’s economy which is already affected by diplomatic standoffs, volatility and political tensions. If the outcome of election is repeated the market will fall badly due to uncertainty, as stated by Timothy Ash senior emerging marketing strategist at Blue bay asset management.
The impression is pretty clear that the process of election in Turkey is not secure. Even the efforts of Turkish central bank to save its currency by relaxing the reserves are not helping. Turkish Lira is continuously losing its value. Business in Turkey is happening in Euro away from Lira.
So many problems have encircled Turkey’s economy like skyrocketing inflation, mounting foreign denominated debt, widening of current account deficit and diplomatic sanctions. Even critics are accusing the ruling party of attacking democracy. Instead of providing impetus to the economy the government is running for a new election which is a matter of great concern for the country. Investors doubt the policy decisions after the elections as government is not making any efforts to calm the economy.
Even IMF has not made any clarity over any grant for turkey at this stage as the banks have very poor balance sheet. Erdogan’s government is standing in the middle of choosing either US made F-35 or Russian made S-400 keeping aside NATO membership at stake. Foreign policy of the Turkey is indecisive state. Purchase of S-400 will surely increase the tensions with US which are at record high due to uncertainty of election outcome.