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The Turkey turmoil triggered by a botched coup is weighing heavy on the psyche of the investors. They are alarmed. Worse, the spreading post-putsch purge of dissent is adding to the concerns of the businesses and companies. They are quite lost as what to do next.
The lira has plummeted, equities have been dumped, the tourism sector is in a shambles and banks will take time to recover from the sudden, rude blow. After the coup attempt, Istanbul-based lenders Yapi ve Kredi Bankasi AS and Sekerbank TAS cancelled $800 million of debt sales. The banks are witnessing a 33% growth in bad loans and clouds of bankruptcy filings are hovering. Tens and thousands of people have lost their jobs. It’s a chaos that is extremely disturbing and has put the economy in stress. As an aftermath of the commotion, the country is coping with poor export markets, crumbling investment and depleting business confidence.
The unpredictability is fanning fears of economic havoc. What is needed right now is political stability that will bring back the financial faith in the institutions. Turkey must keep its engagement with international economic players, rather than thinking in isolation. The UN World Tourism Organization has signed a pact with Turkey to ensure that the country’s sagging tourism industry gets a boost. The agency will help Turkey get more direct flights from key European markets. Tourism rakes in huge revenues for the country and is also a job-churner. It is, therefore, crucial that the sector is set on the path of revival. And for this revival to happen, the most important element is imbibing a sense of security in the travellers. The ball should be set rolling for the halted package tours and popularity of tourist hotspots must be marketed with an increased commercial push.
While taking bold decisions, President Recep Tayyip Erdogan has to continue the economic reforms that his government was carrying out before the coup bid. Erdogan is done really good on the development front till now. The proportion of people below the official poverty line has dropped to less than 2 per cent. Education has improved. Employment graph went up. The country bounced back from the 2008 recession. Erdogan has played a great role in safeguarding the democratic set-up, with support from his die-hard fans. Now is the time to solidify it by bringing about more transparency and rooting out corruption. The President should be wary that the purge should be aimed at providing a safe environment for the businesses where their economic performance improves.
Turkey needs structural reforms and calculated spending on infrastructure while making sure that the policies aim at future gains. Retaining the faith of the investors and producers will bear economic fruits. The target of a 4.5% expansion in the country’s economy will be possible only when the rules are put into place and the climate of certainty restored. A research paper by assistant professor and economist Erik Meyersson of the Stockholm Institute for Transition Economics indicates that failed coups in democracies do not have growth effects and the numbers give no clear reason to be worried, at least not over the 10-year time horizon. However, such research doesn’t give Turkey the license to relax and let time take its course. After all, it is the present which is more important for the masses. And the economists, policymakers and politicians know this pretty well!