Turkey’s new economy team wins over foreign investors

ANKARA — Turkey’s Finance Minister Mehmet Simsek and Central Bank Governor Gaye Erkan held their first international investors meeting on Friday. 

Simsek and Erkan addressed investors in the Turkey Economic Forum organized by JP Morgan that brought together 50 foreign companies, Turkey's HaberTurk TV reported. The duo also held separate meetings with international companies including JP Morgan, Singapore Wealth Fund and  Franklin Templeton, according to Turkey’s public broadcaster TRT. 

The meetings come as part of a fresh push led by Simsek to draw foreign funds to the country as the Turkish government grapples with a foreign currency crunch. 

Simsek and Erkan were appointed to their posts following Turkish President Recep Tayyip Erdogan’s reelection in May. With them at the helm, Ankara has steered its economic policy back toward rational ground after two years of unconventional monetary policies.

Erdogan had long advocated the idea that high interest rates are the cause of higher inflation. Under his influence, Turkey’s Central Bank lowered the country’s interest rates to single digits in stark contrast to other G-20 economies, the majority of which raised their policy rates to safeguard their local currencies and weather the impacts of Russia's invasion of Ukraine. 

The policy has sped up the devaluation of the Turkish lira and fueled the country’s cost-of-living crisis. Turkey’s year-on-year inflation reached a 24-year high of 85.5% in October before easing in the ensuing months, largely due to a strong base effect from the same period the previous year. The downward trend ended when official data showed the country’s annual inflation had soared by almost 50% in July, increasing to 47.83%.

The Central Bank’s net foreign reserves fell below zero in May. Government critics attribute the loss to a scheme in which the bank burned through its foreign reserves in back-door efforts to prevent a currency shock in the lead-up to general elections in May. 

Erdogan traveled to the Gulf in July in the first regional tour of his new term. The trip was largely aimed at drawing funds from oil-rich Gulf monarchies. 

In a bid to regain the trust of Western-based foreign investors, the Central Bank to raise its interest rates by 900 basis points in successive rate hikes in June and July. 

The duo’s takeover of Turkey's economic management in June seem to have won back foreign investors’ trust. Overseas investors bought $179 million in local equities last week, an eighth straight week of inflows, according to the latest data from the Turkish Central Bank.