Bloomberg on investor sentiment turning skittish

Date:19May2018

This overview piece by Bloomberg’s Istanbul Bureau Chief, B. Harvey, regarding the recent deterioration in investor sentiment toward Turkey is well worth the read, especially for starters. Much of it has to do with “institutions”, is one of the key messages of the article. In contrast, the government officials, such as Deputy PM Mehmet Simsek, tend to argue a lot of what’s going on is about “perception” rather than reality — an argument that apparently finds a lot of takers among AKP supporters. According to a recent poll by a reputable polling company for instance, AKP voters seem generally confident about the economic outlook, and see recent market volatility resulting from some sort of a foreign plot against Turkey (see latest Konda report here, p.60 on the latter, in Turkish). But as a saving-deficit country that has become so accustomed to living beyond our means, Turkey’s economy needs “other people’s money” — and getting the endorsement from AKP’s own constituency may not suffice. So perception or not, Ankara needs a strategy to reduce economic imbalances, and reverse the deterioration in the broader institutional environment (for one particularly sobering example of the latter, see the exhibit “a decade of declines” at this link), if Turkey were to become investors’ darling again…