Canakci Says Turkey's Economic and Financial Shock Is Temporary

  • Medium-, long-term focus shouldn't be on `transitory shocks'
  • Turkish policy makers `very well aware' of challenges

Turkey’s financial-market strains are temporary and will ease once uncertainty over political conditions and U.S. monetary policy subsides, said Ibrahim Canakci, the country’s deputy at the International Monetary Fund.

“Regarding the short-term outlook, the expectation of U.S. policy rate lift-off, strong appreciation of the U.S. dollar, regional geopolitical tensions and domestic political uncertainties are putting some pressures on key financial-market indicators,” he said at a speech in Ottawa Monday night. “Concerning the medium- to long-term outlook however, I believe we should keep in mind the fundamentals, and we shouldn’t focus too much on transitory shocks.”

Turkey’s lira last week capped its longest stretch of losses in 16 years as mounting political turmoil compounded a worsening security situation before general elections in November. The prospect of a U.S. Federal Reserve rate increase has also damped appetite for riskier assets, with foreign investors pulling a record amount out of Turkish stocks and bonds so far this year.

“Once the geopolitical tensions are settled, domestic political uncertainties are cleared, and structural reforms are accelerated after the elections, the Turkish economy will easily perform with strong and sustainable growth,” said Canakci, the country’s former Treasury undersecretary. “Turkish policy makers are very well aware of the pressing short- and long-term challenges.”

One of the major strains has been the Syrian migrant crisis, Canakci said, adding it will be discussed “in detail” at a Group of 20 leaders summit Turkey is hosting later this year.

“We hope that the whole world and particularly the Europeans will come up with a more comprehensive, more structured approach to this issue,” he said.

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