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Economic implications of failed coup attempt in Turkey

Türkiye Materials 18 July 2016 15:46 (UTC +04:00)
Analysts of the British consulting company Capital Economics forecast Turkey’s GDP growth at 2.5 percent in 2017 and 2.8 percent in 2018.
Economic implications of failed coup attempt in Turkey

Baku, Azerbaijan, July 18

By Aygun Badalova - Trend:

Analysts of the British consulting company Capital Economics forecast Turkey’s GDP growth at 2.5 percent in 2017 and 2.8 percent in 2018.

On July 15 evening, Turkish authorities said a military coup attempt took place in the country. Meanwhile, a group of servicemen announced about transition of power to them. However, the rebelling servicemen started to surrender July 16 and Turkish authorities said the coup attempt failed.

“The near-term economic impact of Friday night’s attempted coup in Turkey will depend on the length and severity of market dislocation, but at the very least the economy is likely to suffer a period of slower growth, and the lira will remain under pressure,” William Jackson, Senior Emerging Markets Economist at the company said in a report, obtained by Trend.

The longer-term economic repercussions will hinge on the political fallout, he said.

Economist mentioned that Turkish lira, which dropped by five percent against the US dollar on Friday night, has regained some of its losses this morning, strengthening by around two percent against the dollar.

The report also noted that the key point from an economic perspective is that Turkey has a low domestic savings rate, making the economy reliant on capital from overseas to finance investment and improve the capital stock. That in turn requires a stable and predictable political environment and improvements in the business environment.

The improvements in governance seen in the early 2000s coincided with faster and steadier growth, as well as lower inflation, compared with the politically-tumultuous 1980s and 1990s. The current direction of Turkish politics implies a slower and more volatile growth path, according to the economist’s report.

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