After the Turkish government implemented new measures, foreign capital is pouring into Türkiye. This influx of foreign investment indicates the return of foreign investors and is contributing to the rebuilding of the country’s reserves.
These positive developments were noted by a regional lead economist at the European Bank for Reconstruction and Development (EBRD).
Türkiye’s shift toward orthodox economy policies needs to be sustained, Rafik Selim told Anadolu.
His remarks came after the latest EBRD Regional Economic Prospects report published on Wednesday revised its yearly GDP growth projection for Türkiye to 3.5% from its May forecast of 2.5%.
For the region, the EBRD expects a slowdown in economic growth to an average of 2.4% this year.
The revision for Türkiye reflects strong growth in the first half of the year, driven by pre-election fiscal stimulus, the bank said, while pointing out that there are still external imbalances.
The EBRD expects the Turkish economy to grow by 3% in 2024.
Selim noted that steps taken by the government since the May elections have been received with cautious optimism by markets.
“We are witnessing a decline in Türkiye’s credit risk premium (CDS) from its historic peak in May 2023. We are also seeing an improvement in investor confidence. Foreigners’ holdings of Turkish equities and bonds have picked up strongly,” he said.
The CDS score, which was 700 points before the elections, fell below 400 after the government’s measures and messages given in its Medium-Term Program.
“The new measures, such as consecutive hikes in policy interest rates, increases in the value-added and other taxes, and cutting back on interventions to defend the lira are expected to also lead to lowering the current account deficit, which has widened significantly, and rebuilding foreign exchange reserves,” Selim said in an email interview.