Turkey’s emergency must not affect economy

Triumphant Turkish President Recep Tayyip Erdogan seems to consolidate his full authority to weed out those behind the botched coup in Turkey. To accomplish the job, the authorities imposed a three-month state emergency to protect the democracy amid concerns from
western allies who call for fair trials.
Taking into account these concerns, the authorities were quick to assure them that Turkey would remain on course of the democracy and preserve freedoms. Yet, the emergency law gives authorities special provisions, including longer detention of suspects without trial.
Erdogan’s government has been under fire from rights groups for suppressing media criticism and interfering with courts. Nonetheless, the allies don’t go further in their criticism due to the fact that Turkey plays a vital role in the US-led fight against Daesh and the EU’s attempts to halt the westward flow of Syrian refugees.
The Turkish President didn’t lose sight that the emergency would have a far reaching effect. Hence, he is trying to re-assure critics that economic reforms would continue as the government cracks down on the coup-plotters to wipe out what Erdogan calls viruses. Further, the government won’t relax fiscal discipline and will continue with planned investments.
Since the coup bid, thousands of army officers, judges and prosecutors have been detained. A wider purge is under way that encompasses universities, schools and the civil service. Financial markets have been thrown into
disarray.
Given uncertainty, the lira slid to a record low as S&P Global Ratings downgraded Turkey’s debt on Wednesday, saying political upheaval may scare off investors.
The central bank lowered interest rates and Standard & Poor’s cut Turkey to BB from BB+, with a negative outlook. Turkey’s banking index fell as much as 3.9 percent in Istanbul on Thursday, before paring losses to 2.9 percent, while the benchmark Borsa Istanbul 100 index lost 3.8 percent. Both gauges were heading for their lowest closing levels since mid-February.
Trading in Turkish stocks and bonds have both plunged this week in the
aftermath of the coup attempt.
Along with Turkey’s western allies, investors have also expressed unease about the post-coup crackdown. “The longer the backlash continues, the greater the risk of market stress,” William Jackson, a senior emerging-markets economist at Capital Economics in London, said in an e-mail.
Worse still, Istanbul-based lenders Yapi ve Kredi Bankasi AS and Sekerbank TAS cancelled about $800 million of debt sales this week after the attempt to unseat Erdogan and ensuing political unrest that spooked investors.
The political instability threatens to add to an already difficult year for banks as they contend with a 33 percent surge in bad loans and soaring
bankruptcy filings.
Yet, the Turkish economy will weather the political storm. The nation’s lenders owe $120 billion to institutions abroad, according to data from the Bank of International Settlements. Deputy Prime Minister Mehmet Simsek said there’s no need to worry about the economy, investments and markets after the imposition of the state of emergency.
Since he came to power in 2002, Erdogan picked the fruits of stability. He has what it takes to restore confidence of local and international investors through allaying their fears that the state of emergency will not affect
business nor freedoms.