Turkish Central Bank’s recent decision to raise interest rates attracts interest from foreign investors

Last week, Turkey’s Central Bank (TCMB) announced an interest rate hike from 17.5% to 25%, in a move seen by many as a piece of a return to economic orthodoxy following President Recep Tayyip Erdoğan’s victory in May’s elections. Aimed at curbing runaway inflation of the Turkish Lira, last week’s rate hike was the third such increase since June. 

Foreign investors who spoke to Reuters have reportedly viewed last week’s 7.5% increase favorably, seeing it as a sign that the Erdoğan administration is serious about embracing orthodox economic policies following years of low interest rates and soaring inflation. Last week’s hike was followed by a 7% gain by the Turkish Lira.

Finance Minister Şimşek to visit New York in September

Turkey’s newly appointed Minister of Treasury and Finance Mehmet Şimşek is planning a visit to Goldman Sachs in New York in a bid to convince existing investors to stay and attract new investors to the country. Şimşek’s September 19 trip to the Big Apple will be followed by similar trips to London and Morocco before the end of the year, also aimed at courting foreign investors. Şimşek’s upcoming travels are part of a plan from the Finance Ministry over the coming months ‘aimed at reducing economic uncertainty’.  

Attracting investment expected to be challenging

In a recent analysis piece published by Reuters, economists Nevzat Devranoğlu and Karin Strohecker wrote: “Even if some of Turkey’s economic policies have changed, convincing foreign investors will not be easy.”

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Following the recent interest rate hike, MIT Economist Daron Acemoğlu wrote:“It’s a step in the right direction, but it remains uncertain if it will be consistently followed through. I foresee challenging days ahead for Turkey and its people.”

Written/translated for Medyascope by Leo Kendrick