“Lira weakness, strained liquidity and depleted reserves will have effects on Turkey’s real economy – these will, in turn, loop back to further currency weakness. These shocks are heightened by Turkey’s generalized policy uncertainty – as measured by Turkey’s policy mentions in the media. For most countries, economic uncertainty is roughly constant with some outlier periods. Turkey is special in this respect because it has frequent periods of politically-driven uncertainty, according to the International Monetary Fund. Its political turmoil will create more uncertainty, contributing to business decisions being put on pause, lower investment and a reduction in short-term finance in the private sector. This will fuel further financial volatility,” writes Phyllis Papadavid, ELIAMEP Research Associate, in her article for Kathimerini.

Read the full article in English here.