Turkey's economy to come out stronger from foiled coup: govt

Deputy Prime Minister Mehmet Simsek says the impact of Friday's attempted coup on Turkey's economy will be short-lived and there is no question of implementing any capital controls.

Photo by: AA
Photo by: AA

Mehmet Simsek sees economy prospering in coming months.

There is a lot of speculation internationally about the fallout of Friday's failed coup attempt on Turkey's economy, especially after rating agency Standard and Poor's downgraded its economic outlook.

International analysts fear that foreign investment might decline, already wary tourists may come in lesser numbers and financial market could come under stress.

But the government is asking them to consider some simple facts:

Turkey's economic growth is one of the highest not just in Europe but among all emerging economies.

The coup, which involved tanks, jets, helicopters, and resulted in the deaths of over 200 people, did not paralyze life on the streets – in Istanbul and Ankara people were back to work in less than two days.

And whatever frictions existed between the government and opposition parties have been overshadowed by cooperation in safeguarding Turkey's democracy.

Turkish Deputy Prime Minister Mehmet Simsek, who is also a respected economist, says any impact of the coup on the economy will be short lived.

"This was an extraordinary shock, no question about it," he said speaking at TRT World's Money Talks show.

"People were able to overcome it so quickly. By Sunday I was back in office and by Monday everything was functioning reasonably well."

In the immediate aftermath of the July 15 coup attempt, people lined up at ATMs to withdraw cash, leading some analysts to fear cash shortages at banks.

Simsek said that was a one-off event.

Banks are well capitalized and immediate steps including setting aside sufficient foreign exchange liquidity had helped reassure the investment community.

"It was very interesting…we saw households selling hard currency to buy lira. That's because Turkish people have confidence in their future." 

He brushed aside speculation about any sort of restriction on withdrawal of investments and deposits.

Simsek also asserted that nothing is going to change after the imposition of a state of emergency. 

Economy minister: rating downgrade 'incomprehensible'

On Wednesday S&P downgraded Turkey's sovereign credit rating from BB+ to BB, drawing an immediate reaction from officials, with Economy Minister Nihat Zeybekci calling the rating agency's decision "incomprehensible."

"We believe that macroeconomic indicators should also be factored into credit rating decisions," he said on Twitter.

Turkey has seen strong growth performance for the last 14 years. Its Gross Domestic Product, a measurement of the amount of goods and services produced, rose 4.8 percent in the first quarter of 2016.

Economy Minister Nihat Zeybekci.

The government of President Recep Tayyip Erdogan is aiming to end the year with economic growth of 4.5 percent. 

Ed Hirs, an economist at the University of Houston, Texas, said rating agencies are looking for the government to do its best to reassure investors that business will continue as usual.

But he does not think that the downgrade will create serious concern for Turkey's international trading partners.

"A ratings change does not change the working relationships. At worst, the ratings change may increase the cost of borrowing for major projects."

Blessing in disguise?

The aftermath of the coup could actually make the economy stronger, said Simsek.

"Political stability should be strengthened because President Erdogan has proven to be right about his concerns of rouge elements running a parallel state."

Officials say the government's action against those who want to destabilise the country will be viewed positively.

The support of opposition parties for the government against military intervention will help strengthen economic fundamentals. 

Turkey has not seen such "political reconciliation" in nine years, said Simsek. 

TRTWorld and agencies