In the aftermath of Russian sanctions, the Central Bank of Turkey will have to conduct expanding monetary policy to stimulate domestic demand, Mr Nurhan Davutyan, professor of economics at Kadir Has University, Istanbul, told Armenian News - NEWS.am.
According to him, the sanctions by Russia are obviously quite harmful from a macro viewpoint, and they are negatively impacting particularly tourism, as well as construction revenues. So the spare capacity of business, caused by the Russian embargo, has to be filled by serving other markets, preferably foreign ones, to keep up foreign currency streams.
"To the extent that replacing foreign demand cannot be found, to substitute Russian tourists and construction jobs, there is a need to find domestic buyers. Thus this (extra) need means renewed pressure on the Central Bank to stimulate the domestic economy. One can follow this pressure from the Turkish media (by following the speeches of our President, etc.)”, Mr Davutyan added.
According to the data quoted by Daily Sabah, in January 2016 Turkey saw a decline of incoming tourists from Russia by 56.7% (i.e. more than twice) compared to January 2015.
A number of analysts state that foreign investors are unhappy with the expanding fiscal and monetary policy of Turkey’s president and his government, who want to prop up domestic demand.
From January 2016, the government raised minimal salaries by 30%, pledging to compensate 40% of that increase (around $3,3 bln).
Foreign businesses are instead waiting for more austerity and otherwise, tend to withdraw investment. According to data collected by Bloomberg, they have sold more than $10 bln of Turkish stocks and bonds.
Turkish lira had been falling against the USD all through 2015, even when there was no sign of Russian sanctions. At the beginning of last year the lira stood at 2,2 – 2,3 against the dollar, while now it is trading at around 2,88.
Still, the Central Bank of Turkey has not raised policy rates for more than a year. On March 24 it moved slightly upwards one of the three rates, leaving the other two unchanged.
