The news of the arrest of Erdogan’s opponent, Ekrem Imamoglu, also had a serious impact on Turkish stock markets, significantly affecting the confidence of many investors in the country. As a result, the Turkish Stock Exchange experienced the worst week since the 2008 global crisis: the ISE 100 index lost in a few days more than 16% of its value.

The country’s Securities and Exchange Commission has reacted by banning open sales and investments in a further downward trend in the stock market and facilitating stock reproductions in order to support the prices of securities that had fallen sharply.

The index went up 2%for a short time, but shortly thereafter returned to Red, reaching the worst level since November.

Observers estimate that this development could also be a big problem for Erdogan. Because in recent years Turkish investors have invested a lot of money on the Stock Exchange, with the aim of protecting their property from high inflation – which is still at 39%.

Increasing political uncertainty

In the week we are going through, it is a bit better, since Finance Minister Mehmet Simsek promised to take “all necessary” measures to stabilize markets, adding that Turkey is still offering good long -term investment opportunities. Simsek, jointly with Turkish Central Bank Governor Fatih Karahan, is set to continue his investor -friendly policy pursued by Erdogan over the past two years.

At the same time, the Turkish pound fell against the dollar, but this retreat was only 3%, which somewhat reassured investors – as well as experts appear to be the result of overseas residents.

As Erdal Yalcin, Professor of International Economy, points out on DW, “after a long period of political uncertainty, extremely high inflation and persistent economic crisis, Turkey has recently been in a stabilization track.” With the significant increase in interest rates and the support of the pound, the country “has managed to attract investors again from abroad” – and therefore “state bonds and stock markets are clearly going through a recovery period”.

The arrest of Imamoglou, of course, overturned the facts: “In the short term, political uncertainty has increased sharply. Within a few hours, international investors withdrew large funds from Turkish stock markets. And at the same time, the pound was treated with huge pressure, with the Central Bank considering the sale of a large part of the stocks in order to stabilize the currency, ”Yalcin explains.

A blow to the tourism industry?

Tourism, one of the most important economic sectors in the country, may also have a financial impact, which has happened in the Mediterranean countries during the crisis. Experts, however, do not even think that there is still a reason for severe concern.

Marco Gardini, a tourist administration professor in Cuben, points out that Imamoglou’s arrest has shaken the waters in international political and diplomatic circles, but “probably not affecting many of those who are thinking of visiting Turkey” Erdogan. “

The expert also considers that the impact of tourism will be similarly limited to the mass mobilizations of recent days. What should be a cause for concern, however, is climate change, which is “the greatest long -term risk for tourism” in view of the significant temperature rise in the summers.

At risk the financial system?

The implications of political uncertainty for banks and the financial system in general are unpredictable.

As Yalcin points out, “because of the increased funding cost”, Turkish banks are “under pressure”. International investors may be very restrained, and this “there is a risk of leading significant outflows, resulting in deterioration of liquidity problems and the risk of stability in the entire financial system”.

At the same time, the real estate industry is also directly dependent on the moods of international investors, and there may also be implications for export -based industries – the latter will probably find themselves in worse conditions, “because international trade partners will be more and more. Uncertainty on the stock market also increases insurance costs for export companies, which could hurt their competitiveness. “

An important partner

The extent of the impact of Imamoglou’s arrest in the financial sector will be in the medium term during the year. According to Yalcin, however, it is possible that the current political crisis will not have long -term consequences on the Turkish economy.

In any case, both the EU and the US want the return of stability to Turkey, “on the one hand because the country is a partner in NATO, on the other hand because Turkey has an important strategic role in limiting migratory flows to Europe.” That is why Europe has not made any particular critical statements on the Erdogan government.

Curated by: George Passas