ISTANBUL – The Turkish lira and the Istanbul stock market rose sharply on Monday after the surprise win by the ruling Justice and Development Party (AKP) on November 1, 2015.
The currency jumped 2.9%, the most since January 2014, to 2.8320 against the dollar. It rose 3.8 per cent last month, the biggest jump since January 2012, on optimism that if the vote on Sunday were inconclusive, political parties would be more inclined to establish an alliance this time around. The Borsa Istanbul 100 index and the yield on the government’s 10-year debt in October rallied the most in a year.
A coalition government had been expected, so the prospect of a potentially more stable administration has boosted confidence.
Turkey’s political problems and signs of weakening economy had undermined the Turkish lira this year.
Polls had indicated the AKP would receive between 40% and 43% of the vote, in line with how it fared in June, when the party lost its majority after 13 years.
Attempts to form a coalition government after the June election failed.
Sunday’s victory will allow the AKP to form a government on its own and will boost President Recep Tayyip Erdogan.ers
William Jackson, senior emerging markets economist at Capital Economics, said: “This has alleviated concerns about further political uncertainty, but it remains to be seen whether the party will try to regain its economic policymaking credibility that had slowly eroded over the past few years.
“The key for investors to look for is any sign that the AK party will try to regain its economic policymaking credibility.”
Trader Steve Walker noted that “This election will end Turkey’s period of transition and should lead to a marked strengthening of the country’s economy.”
Economists want to know if the government has any fresh plans to boost the flagging economy.
Turkey’s economy is expected to expand about 3% this year, below the government’s official target of 4%.
Inflation, which hit 7% in August, is a growing concern for policymakers. -Courtesy Anatolia News Agency