Navigating the Turkish Economic Landscape: Seeking Rational Policies for a Brighter Future

Turkey's economy has been facing significant challenges, leading to a negative impact on the financial markets. In a previous article written before the elections, I highlighted the deteriorating state of the Turkish economy and shared my concerns regarding its future prospects. Unfortunately, many of the expectations I outlined in that article have been realized, and the analysis I presented remains valid. I recommend reading my previous article.

Nevertheless, it is crucial to provide a brief update and evaluate the current situation after the elections. The prevailing conditions characterized by high inflation, lack of real returns, negative central bank reserves, a weak and fragile Turkish lira, limited portfolio investments in the stock market, an unresolved current account deficit, and unmet expectations regarding central bank policy rate hikes continue to persist. We are all aware of how concerning this situation has become. Not only the balance of the economy but also the society as a whole has been disrupted.

The question on everyone's mind is: What will happen next? The environment remains irrational and chaotic, making it challenging to make accurate predictions. In such circumstances, the smartest investment strategy is to exercise patience, while also ensuring our investments are protected against inflation by investing in dollar or euro-based mutual funds and precious metals.

At the core of all investment strategies lies the importance of accurate, consistent, and reliable data. In Turkey, the Turkish Statistical Institute serves as the counterpart to provide such data. However, the reliability and accuracy of the data they present are highly debatable. We still do not have a clear understanding of inflation rates in Turkey, which directly impacts the determination of interest rates. This forms the fundamental crux of the matter. The answer to all the questions ultimately lies in this perspective.

It is relatively simple to revive the Turkish economy and regain trust by adopting rational policies. The question is, will this choice be made? In other words, will there be a monetary policy with interest rates slightly above inflation, providing real returns? Doesn't the Federal Reserve in the United States do the same thing? They have been doing it for eight months. They achieved a positive outcome eventually, but they have not let their guard down. They stated that they might increase interest rates twice. They manage expectations professionally and in the way they should be done. In Turkey, it is the opposite. We are trapped in a vicious cycle like a cat chasing its tail. Eventually, this cycle will be broken, with a central bank interest rate exceeding the inflation rate that provides real returns. I believe nobody knows when this will happen or even if it will happen and all risks will be taken.

In such a scenario, as time goes by, both the interest rates and the USD/TRY levels mentioned in my first article will continue to rise. My expectations for the interest rates meaning deposit rates were between 40-50% and for USD/TRY is between 25-27. As for the stock market, investors find themselves in an illusion. It is essential to invest without trying to find only high-yielding stocks and by analyzing the returns in USD terms. Additionally, investors and individuals need to approach the financial markets with caution and a realistic perspective. Relying solely on past performance or optimistic assumptions can lead to misguided decisions. It is important to evaluate investment opportunities based on fundamental analysis rather than technical analysis, considering factors such as financial indicators, market conditions, and the overall economic landscape.

To address the current situation and foster economic development, it is crucial for Turkey to adopt rational and proactive policies as soon as possible. The most important key measure that we will observe are real returns and interest rates slightly above inflation. Without seeing this, it may be dangerous to be optimistic and open long-term positions.

In conclusion, the challenges facing the Turkish economy and financial markets are undeniable. However, with the right policies, reforms, and a commitment to transparency, Turkey has the potential to overcome these difficulties and restore stability.

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