Turkey’s economic growth will suffer a temporary period of weakness in the next few quarters as a result of the latest military coup attempt in the country, William Jackson, Senior emerging markets economist at Capital Economics believes.
“The attempted military coup in Turkey last month doesn’t appear to have triggered a sharp decline in capital inflows, but there are already signs that the hit to confidence will cause domestic demand and overall GDP growth to suffer a temporary period of weakness in the next few quarters,” Jackson said in a report, obtained by Trend.
In the aftermath of the coup, Capital Economics’ analysts argued that Turkey’s economy was particularly vulnerable if heightened political risk triggered a slowdown in capital inflows, which in turn could result in a sharp fall in Turkish lira and weaker domestic demand.
“But for now there are few signs of a significant decline in foreign funding,” Jackson said.
Data on non-residents’ net purchases of Turkish equities and public debt showed outflows of $0.5B in the week to July 22, compared with inflows of over $1billion in the week before. But this shift doesn’t look dramatic when viewed in the context of the weekly moves seen in the past year and a half, according to the report.
Political risk means the tourism sector, which was already struggling, is likely to weaken further, Jackson believes.
He said analysts of the company expect GDP growth likely to come in at 2-2.5 percent year-over-year in the second half of the year compared with around 4.5 percent year-over-year in the first half.
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. Turkey’s President Recep Tayyip Erdogan said that the death toll as a result of the military coup attempt stood at 246 people excluding the coup plotters and over 2,000 people were wounded.
Erdogan declared a three-month state of emergency in Turkey on July 20.
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