The Turkish currency weakened after Recep Tayyip Erdogan won a runoff in Sunday’s presidential election, extending Turkey’s longest presidential term by five years, as investors look for clues about when he will loosen his grip on financial markets, Bloomberg reported.

On Monday morning, the Turkish lira fell 0.3% to 20.03 lira to the dollar, near an all-time low, to 20.01 lira to the dollar around 6:40 a.m.

Wall Street analysts expect the Turkish currency to depreciate further, with Morgan Stanley warning that it could hit 26 pounds to the dollar earlier than expected and rise to 28 pounds to the dollar by the end of the year if Erdogan continues his policy of deliberately keeping interest rates low. levels Analysts at Wells Fargo & Co expect 23 pounds to the dollar by the end of this quarter.

“Erdogan’s victory is not a signal of confidence for foreign investors. With very high inflation, low interest rates and a lack of foreign reserves, one can foresee a painful crisis affecting all assets,” says Hasnain Malik, an analyst at Tellimer in Dubai.

According to unofficial preliminary results released by public agency Anadolu, after 99% of ballots were counted, Recep Tayyip Erdogan won 52.1% of the vote, Kemal Kilicdaroglu – 47.9%.

Analyst: “It is clear that the current economic model does not work”

Erdogan’s unorthodox approach to interest rates, which argues that high interest rates fuel inflation, has left markets at the mercy of a mix of regulations and ad hoc interventions, so that new measures are introduced informally or out of the blue. Under these conditions, foreign investors have left and foreign holdings of Turkish stocks and bonds have fallen by nearly 85%, or $130 billion, since 2013.

Erdogan’s economic policies have come at a cost, with Turkey’s Central Bank spending nearly $200 billion to prop up the lira over the past year, foreign reserves plunging into negative territory, and inflation soaring to 80% last year.

“It is clear that the current economic model does not work. Most likely, Erdogan is aware of this, and a modest transition to more orthodox politics is likely in the near future, because otherwise it is impossible. Any signal in this direction will be accepted by the market,” says Burak Cetinchecker, fund manager of Strateji Portfoy in Istanbul.

Appointments to key economic positions, for example, in the Ministry of Finance and the Central Bank, may be the first signal of a possible change in policy. All incumbent ministers won seats in parliament in the first round of voting two weeks ago and will have to give them up if they are appointed to cabinet posts. (Agerpress)

Article photo: DreamsTime.com