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Investments pour into Turkey over optimism in Erdogan's economic team

By Al Mayadeen English
Source: Agencies
16 Jun 2023 11:35
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Turkey's central bank reveals that during the week, on June 9, $262 million in oversea investments poured into the local stock market.

A picture taken on December 7, 2021, in Istanbul shows US dollar banknotes and Turkish lira banknotes. (AFP via Getty Images)

Turkey witnessed a flood of foreign investments in its stock market as the newly assigned economic leadership ushered in a positive outlook regarding the country's financial and monetary policies.

Reaching a six-month high since December, $262 million of Turkish stocks were bought in by investors from abroad last week, the Turkish Central Bank data revealed. Bond purchases amounted to $25 million during the same week of June 9.

Following his re-election, Turkish President Recep Tayyip Erdogan appointed two former Wall Street executives, one as head of the country's central bank and the other as finance minister, in an attempt to regain investors' trust that has dwindled earlier due to Turkey's unorthodox financial policies, especially that of interest-rate decisions.

Erdogan has opted to slash interest rates in past recent years and resort to draining federal reserves to maintain the Lira value, despite the skyrocketing inflation, which raised concerns over the market stability.

Hafize Gaye Erkan, a former co-CEO of American First Republic Bank and managing director at international financial institution Goldman Sachs, became the central bank's first woman governor, while former Merrill Lynch economist Mehmet Simsek was assigned as finance minister.

During the term of former central bank chief Sahap Kavcioglu, the interest rate was lowered to 8.5 percent after being 19 percent in 2021.

In May, the country's inflation rate dropped to under 40 percent, a 16-month low.

Erdogan began curring interest rates to keep investment cheaper and growth more possible, but after inflation started running wild by hitting an estimated 85% annual rate late last year, the President was keen on keeping interest rates low to attract more growth. However, that came at the expense of the price of the Turkish lira, which plummeted gravely.