The thumping victory of Turkey's opposition party over President Recep Tayyip Erdogan's AK Party (AKP) in Sunday’s local polls could be indicative of voters' objection to the economic problems in the country, but it is unlikely to lead to any immediate major shift in policy, analysts say.
The Republican People’s Party (CHP), which gained control of Istanbul and Ankara, blamed the nearly 70 per cent inflation rate, sluggish development, and the vigorous monetary tightening policy that has increased borrowing rates as factors that damaged the AKP's performance.
Despite Mr Erdogan and his party facing their worst defeat in more than two decades in power, the leader said they will stick with the current economic turnaround programme.
In a speech at 12.30am, Mr Erdogan said the government would pay greater attention to pressing issues including the recovery of the areas hit by last year's earthquakes and economic challenges.
Following his remarks, Turkey’s lira, which hit a record low against the US dollar, reversed its losses and was trading at 32.11 to a dollar as of 7.56pm UAE time.
Turkey main stock market, the Borsa İstanbul's BIST 100 share index, closed up by 0.17 per cent on Monday.
On Monday, Turkish Finance Minister Mehmet Simsek also said his country will continue to implement its medium-term economic programme, which was announced in September with the goal of reducing inflation.
The government “will prioritise savings by controlling public spending”, in addition to implementing a tight monetary policy and selective credit and income policy, to permanently reduce inflation to single digits, he said in a post on X.
"If the economic distress of high inflation is largely to blame for this defeat and the only way to address this is to stay the course on orthodox policy, then President Erdogan is likely to continue backing his technocratic economic policy team,” Hasnain Malik, head of emerging markets strategy at Tellimer, an investment research firm based in Dubai, told The National.
“Short-term, that is reassuring for all Turkish asset prices. But this defeat will make [Mr] Erdogan's finger on the populist policy trigger more itchy once inflation recedes. Medium-term, that increases risk."
Will it impact monetary policy?
After winning re-election in May last year, Mr Erdogan constituted a new, more orthodox economic team, headed by central bank governor Hafize Gaye Erkan and Finance Minister Mehmet Simsek.
Following her appointment, Ms Erkan pursued a more conventional monetary policy to contain inflation, by gradually raising benchmark interest rates.
In February, after her resignation, Turkey named the central bank’s deputy governor Fatih Karahan as its head, signalling a continuation of the transition to more investor-friendly, orthodox economic policies that she had put in place.
In March, Turkey’s central bank increased its benchmark rate to 50 per cent, from 45 per cent, as part of efforts to curb soaring inflation.
Mr Karahan has vowed to increase rates further if inflation continues to rise.
“Even though the [local election] news hints at a potential change – for better – in the future, we won’t see a meaningful change in the immediate aftermath of the municipal elections," said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
“The monetary policy will remain unchanged and the USDTRY – which is trading higher in the wake of the latest elections – should continue trending higher at a potentially higher speed as the central bank may put in less effort to counter the lira’s depreciation now that the elections are behind,” she said in a note on Monday.
In October, the International Monetary Fund commended Turkish authorities for raising the policy rate from 8.5 to 30 per cent in September, which “has in turn boosted confidence, reduced pressures on the lira, and begun to cool domestic demand and ease distortions created by negative real interest rates”.
As monetary policy tightens and the overall policy stance becomes less accommodative, inflation is forecast to fall to 46 per cent at end-2024 from 69 per cent at end-2023 as exchange rate pressures ease, the IMF said.
However, it said further policy rate increases are needed to reduce inflation, accompanied by lower reliance on quantitative measures.
“After the surprise election results, the constructive reaction of Turkey’s president could reassure investors as the government could continue to deploy efforts to strengthen the economy,” Daniel Takieddine, chief executive, Mena, at broking firm BDSwiss, told The National.
“The stock market could see some volatility as investors digest the news and the impact of the elections becomes clearer. The real estate sector and others could face some challenges, but long-term growth prospects remain positive.”
Istanbul's influence
Istanbul continues to be the economic powerhouse of Turkey, with the city accounting for approximately 31 per cent of the country's gross domestic product, or around $276 billion, Mr Takieddine said.
Turkey’s largest city and most expensive housing market, it is home to about 20 per cent of the country's industrial labour force.
Istanbul also generates roughly 43 per cent of the country's total exports and attracts a substantial portion of foreign direct investment, he said.
“Istanbul's diverse economy spans sectors such as finance, tourism, services, and manufacturing. With its strategic location and economic vitality, Istanbul remains a crucial driver of Turkey's economic growth and development,” Mr Takieddine said.
With the CHP now at the helm in Istanbul, controlling Turkey's largest city is likely to give it a bigger boost on the national level.
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
SPEC%20SHEET%3A%20APPLE%20M3%20MACBOOK%20AIR%20(13%22)
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EPL's youngest
- Ethan Nwaneri (Arsenal)
15 years, 181 days old
- Max Dowman (Arsenal)
15 years, 235 days old
- Jeremy Monga (Leicester)
15 years, 271 days old
- Harvey Elliott (Fulham)
16 years, 30 days old
- Matthew Briggs (Fulham)
16 years, 68 days old
UAE currency: the story behind the money in your pockets
Series result
1st ODI Zimbabwe won by 6 wickets
2nd ODI Sri Lanka won by 7 wickets
3rd ODI Sri Lanka won by 8 wickets
4th ODI Zimbabwe won by 4 wickets
5th ODI Zimbabwe won by 3 wickets
How to invest in gold
Investors can tap into the gold price by purchasing physical jewellery, coins and even gold bars, but these need to be stored safely and possibly insured.
A cheaper and more straightforward way to benefit from gold price growth is to buy an exchange-traded fund (ETF).
Most advisers suggest sticking to “physical” ETFs. These hold actual gold bullion, bars and coins in a vault on investors’ behalf. Others do not hold gold but use derivatives to track the price instead, adding an extra layer of risk. The two biggest physical gold ETFs are SPDR Gold Trust and iShares Gold Trust.
Another way to invest in gold’s success is to buy gold mining stocks, but Mr Gravier says this brings added risks and can be more volatile. “They have a serious downside potential should the price consolidate.”
Mr Kyprianou says gold and gold miners are two different asset classes. “One is a commodity and the other is a company stock, which means they behave differently.”
Mining companies are a business, susceptible to other market forces, such as worker availability, health and safety, strikes, debt levels, and so on. “These have nothing to do with gold at all. It means that some companies will survive, others won’t.”
By contrast, when gold is mined, it just sits in a vault. “It doesn’t even rust, which means it retains its value,” Mr Kyprianou says.
You may already have exposure to gold miners in your portfolio, say, through an international ETF or actively managed mutual fund.
You could spread this risk with an actively managed fund that invests in a spread of gold miners, with the best known being BlackRock Gold & General. It is up an incredible 55 per cent over the past year, and 240 per cent over five years. As always, past performance is no guide to the future.
Specs
Engine: Electric motor generating 54.2kWh (Cooper SE and Aceman SE), 64.6kW (Countryman All4 SE)
Power: 218hp (Cooper and Aceman), 313hp (Countryman)
Torque: 330Nm (Cooper and Aceman), 494Nm (Countryman)
On sale: Now
Price: From Dh158,000 (Cooper), Dh168,000 (Aceman), Dh190,000 (Countryman)
Lexus LX700h specs
Engine: 3.4-litre twin-turbo V6 plus supplementary electric motor
Power: 464hp at 5,200rpm
Torque: 790Nm from 2,000-3,600rpm
Transmission: 10-speed auto
Fuel consumption: 11.7L/100km
On sale: Now
Price: From Dh590,000
UAE currency: the story behind the money in your pockets
Cinco in numbers
Dh3.7 million
The estimated cost of Victoria Swarovski’s gem-encrusted Michael Cinco wedding gown
46
The number, in kilograms, that Swarovski’s wedding gown weighed.
1,000
The hours it took to create Cinco’s vermillion petal gown, as seen in his atelier [note, is the one he’s playing with in the corner of a room]
50
How many looks Cinco has created in a new collection to celebrate Ballet Philippines’ 50th birthday
3,000
The hours needed to create the butterfly gown worn by Aishwarya Rai to the 2018 Cannes Film Festival.
1.1 million
The number of followers that Michael Cinco’s Instagram account has garnered.
match details
Wales v Hungary
Cardiff City Stadium, kick-off 11.45pm
Tree of Hell
Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla
Director: Raed Zeno
Rating: 4/5
The specs
Engine: 1.6-litre 4-cyl turbo and dual electric motors
Power: 300hp at 6,000rpm
Torque: 520Nm at 1,500-3,000rpm
Transmission: 8-speed auto
Fuel consumption: 8.0L/100km
Price: from Dh199,900
On sale: now
In numbers: China in Dubai
The number of Chinese people living in Dubai: An estimated 200,000
Number of Chinese people in International City: Almost 50,000
Daily visitors to Dragon Mart in 2018/19: 120,000
Daily visitors to Dragon Mart in 2010: 20,000
Percentage increase in visitors in eight years: 500 per cent
The specs
- Engine: 3.9-litre twin-turbo V8
- Power: 640hp
- Torque: 760nm
- On sale: 2026
- Price: Not announced yet
Zayed Sustainability Prize
Company%20profile
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Skoda Superb Specs
Engine: 2-litre TSI petrol
Power: 190hp
Torque: 320Nm
Price: From Dh147,000
Available: Now
Islamophobia definition
A widely accepted definition was made by the All Party Parliamentary Group on British Muslims in 2019: “Islamophobia is rooted in racism and is a type of racism that targets expressions of Muslimness or perceived Muslimness.” It further defines it as “inciting hatred or violence against Muslims”.
Top investing tips for UAE residents in 2021
Build an emergency fund: Make sure you have enough cash to cover six months of expenses as a buffer against unexpected problems before you begin investing, advises Steve Cronin, the founder of DeadSimpleSaving.com.
Think long-term: When you invest, you need to have a long-term mindset, so don’t worry about momentary ups and downs in the stock market.
Invest worldwide: Diversify your investments globally, ideally by way of a global stock index fund.
Is your money tied up: Avoid anything where you cannot get your money back in full within a month at any time without any penalty.
Skip past the promises: “If an investment product is offering more than 10 per cent return per year, it is either extremely risky or a scam,” Mr Cronin says.
Choose plans with low fees: Make sure that any funds you buy do not charge more than 1 per cent in fees, Mr Cronin says. “If you invest by yourself, you can easily stay below this figure.” Managed funds and commissionable investments often come with higher fees.
Be sceptical about recommendations: If someone suggests an investment to you, ask if they stand to gain, advises Mr Cronin. “If they are receiving commission, they are unlikely to recommend an investment that’s best for you.”
Get financially independent: Mr Cronin advises UAE residents to pursue financial independence. Start with a Google search and improve your knowledge via expat investing websites or Facebook groups such as SimplyFI.
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
The specs
Engine: 3.0-litre twin-turbo flat-six
Power: 480hp at 6,500rpm
Torque: 570Nm from 2,300-5,000rpm
Transmission: 8-speed dual-clutch auto
Fuel consumption: 10.4L/100km
Price: from Dh547,600
On sale: now
