Azernews.Az

By Bloomberg

Turkey’s lira fell to a record after voters denied the ruling AK Party a majority government for the first time since 2002, raising the prospect of a coalition and setting the stage for conflict with President Recep Tayyip Erdogan.

The currency plunged 3.9 percent to 2.7672 per dollar at 7:28 a.m. on Monday in Istanbul. The ruling Justice and Development Party, or AK Party, won 40.9 percent of the vote, giving it 258 seats in parliament, according to preliminary results from the state-run news agency. It needed 276 to form a single-party government.

The pro-Kurdish Peoples’ Democracy Party, or HDP, passed the 10 percent threshold of the national vote needed to win seats in parliament, denying AK Party a majority. If a new government can’t be agreed upon within fourty-five days, the country may have to hold elections again. The results also mean the party won’t be able to deliver its key campaign promise of formally shifting the nation’s center of executive power from parliament to the president.

“There’s far too much uncertainty at the moment,” Kerem Baykal, a money manager at Ak Portfoy in Istanbul, said by e- mail on Sunday. “We don’t even know which party or parties will be in the coalition, and on the very pessimistic side, if any party will join a coalition at all. That could even mean early elections. I don’t think there will be a recovery until we get clarity on this.”

Slowing Growth

The nation’s currency has weakened 15.6 percent against the dollar this year, the most among 24 emerging market currencies tracked by Bloomberg after Brazil’s real. The lira also weakened 3.7 percent to a record 2.9178 in early Monday trading against an equally weighted basket of dollars and euros.

Turkey’s annual growth, which averaged 5 percent under the AK Party’s rule, fell to almost half that rate last year and is set to increase to 3.2 percent in 2015. Unemployment is hovering near a six-year high and inflation has stayed above the central bank’s target since 2011.

“Many investors were still hoping for a single party government,” Ozgur Altug, the chief economist at BGC Partners in Istanbul, said by e-mail on Sunday. “Coalition talks or early elections speculation will determine the trend in financial markets” and until investors see more clarity, markets will remain weak, he said.