TRY: Vulnerable again - Rabobank

According to analysts at Rabobank, the risk that Turkey could be heading for a full-scale currency crisis, after barely avoiding it only a few months ago when the lira was falling precipitously, has resurfaced after President Erdogan appointed his son in law in charge of a new Ministry of Treasury and Finance replacing the roles previously held by Deputy Prime Minister Simsek and Finance Minister Agbal.

Key Quotes

“By giving Mr Albayrak such a prominent role at a crucial time for Turkey and ousting market friendly Simsek and Agbal, President Erdogan has reignited market concerns that his administration may implement unorthodox policies, which include lowering inflation by cutting interest rates.”

“We may have to abandon our cautiously optimistic view that the lira should be more stable based on the assumption that the Erdogan administration will allow the overheated economy to slow down, will phase out fiscal stimulus and will focus on implementing structural reforms over the next two years or so.”