Painful paradox: Turkey suffers despite global upturn in investor sentiment

Originally appeared on Bosphorus Consulting on 27 January 2014

Investor sentiment is at a five year high, according to the Bloomberg Global Poll (“Investors Most Upbeat in 5 Years With 59% Bullish in Poll”, 21 January 2014) with 59% of investors polled stating that the economy is improving, the highest since the poll began. Yet, despite this positive climate, the Turkish lira is falling fast, as we addressed in last week’s blog post. In the January/February issue of Foreign Affairs (“How Erdogan did it – and could blow it”) Financial Times Turkey correspondent Daniel Dombey writes that Turkey’s previous economic success could still unravel, hooked as it is on fickle foreign funds .

Turkey should be a perfect location for investment, the article continues, but this notion is negated by the country’s unstable economy which is nearly entirely reliant on unfavorably high levels of foreign money and domestic consumption. As if further evidence were needed that corrective measures are woefully lacking, Turkey’s current account deficit widened to a four-month high along with drops in the lira on 14 January amid the country’s ongoing political uncertainties (Business Week, “Lira Weakens to Record as Turkish Current-Account Deficit Widens”, 14 January 2014).

Turkish businesses obviously would like to take advantage of the upturn in the global economy and the increasingly optimistic global investor sentiment. With no sign of any effective Central Bank action to ease international investors’ fears, it is increasingly incumbent on business managers and owners to present themselves in such a way as to overcome doubts surrounding the country’s stability.

Investor sentiment is at a five year high, according to the Bloomberg Global Poll (“Investors Most Upbeat in 5 Years With 59% Bullish in Poll”, 21 January 2014) with 59% of investors polled stating that the economy is improving, the highest since the poll began. Yet, despite this positive climate, the Turkish lira is falling fast, as we addressed in last week’s blog post. In the January/February issue of Foreign Affairs (“How Erdogan did it – and could blow it”) Financial Times Turkey correspondent Daniel Dombey writes that Turkey’s previous economic success could still unravel, hooked as it is on fickle foreign funds .

Turkey should be a perfect location for investment, the article continues, but this notion is negated by the country’s unstable economy which is nearly entirely reliant on unfavorably high levels of foreign money and domestic consumption. As if further evidence were needed that corrective measures are woefully lacking, Turkey’s current account deficit widened to a four-month high along with drops in the lira on 14 January amid the country’s ongoing political uncertainties (Business Week, “Lira Weakens to Record as Turkish Current-Account Deficit Widens”, 14 January 2014).

Turkish businesses obviously would like to take advantage of the upturn in the global economy and the increasingly optimistic global investor sentiment. With no sign of any effective Central Bank action to ease international investors’ fears, it is increasingly incumbent on business managers and owners to present themselves in such a way as to overcome doubts surrounding the country’s stability.

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