Turkish economy resistant to coup bid, say experts

By Gokhan Kurtaran

LONDON

Sound economic fundamentals, vigorous economic reforms of Turkey’s financial system and a "prudent" fiscal policy have staved off the negative effects of the July 15 failed coup, experts suggested Thursday.

Timothy Ash, a London-based strategist at Nomura International, told Anadolu Agency that macroeconomic fundamentals in Turkey remained strong:

"There is recognition of Turkey's underlying credit strengths, including a strong public finance profile, low debt ratio of 35 percent of gross domestic product (GDP), and moderate budget deficit at two percent of GDP."

GDP increased by 4.8 percent in the first quarter of 2016 compared to the same period last year, making Turkey one of the fastest growing economies in Europe and among OECD members.

Ash said that a strong banking sector, favorable demographics and durable growth drivers continue to be the main pillars of the Turkish economy.

"In credit space a strong willingness to pay is proven over several decades and stress tested in periods of crisis of 1999, 2001 and 2008," Ash said.

Ash noted that the government and main opposition parties are united against the coup bid in Turkey:

"The Western reaction is like the coup was some kind of a tea party," he said. "The latter is something that the Western media seems to be completely missing by portraying this as an Islamist - secular issue."

Christian Maggio, head of emerging markets research at TD Securities in London, noted the coup attempt was a very serious issue, a significant violation of democratic principles.

"If the coup was successful it would put Turkey into a great uncertainty; it would make the situation much worse than it is today," Maggio said.

Ipek Ozkardeskaya, an analyst at London Capital Group, said that Turkey had returned from the “brink of disaster”.

"If the coup had become a success, there could be selling pressure on the government bonds, the stocks and Turkish lira. Balance-of-payments crisis scenarios would be raised. The country returned from the brink of such a disaster," Ozkardeskaya said.

Turkey has reduced its debt stock. One of the best performers among the European economies in reducing government debt, its debt stock ratio has been meeting the EU's Maastricht Criteria, 60 percent, since 2004.

Public debt stock fell from 74 percent of GDP in 2002 to 33.5 percent of GDP in 2015, very low compared with 74.5 percent of GDP in Germany and 95 percent in France, according to Eurostat.