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Political clouds over Turkish economy

Wednesday, June 10, 2015 - 02:02

Turkey's economy grew a larger-than-expected 2.3 percent year-on-year in the first quarter providing some cheer after a weekend election that left the country facing the prospect of a coalition government. But as David Pollard reports, analysts have their eyes on the country's political uncertainties.

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Strong consumer spending - and plenty to spend it on. One sure thing for Turkey after a weekend election that shifted the political landscape. New data shows household consumption rose four and a half percent in the first quarter - offsetting a decline in exports. GDP rose 2.3 per cent year on year. Better-than-expected, though what analysts see most in Turkey right now is the uncertainty. IG's Alastair McCaig. (SOUNDBITE) (English), MARKET ANALYST, ALASTAIR MCCAIG, IG, SAYING: ''There were always such complexities about that country. The change in the political arena there does raise a lot of question marks.'' The main task for a new government is the economy. Turkey's lira has plummeted to record lows on a feeling that - after a decade in which incomes trebled in the noughties - it's stalled. Critics point to high unemployment - and a heavy reliance on construction, consumption and debt. The key task before that though: forming the government itself. The AKP Party's loss of its dominant majority leaves President Erdogan's move towards a presidential executive in neutral for now. And the newest members in parliament, the pro-Kurdish HDP, denouncing the incumbents for not doing enough about a rising climate of political violence. Party leader, Selahattin Demirtas. (SOUNDBITE) (Turkish) HDP LEADER SELAHATTIN DEMIRTAS, SAYING: "We are the ones who are slaughtered ... If you can't do your job, leave it. If you cannot rule, leave." But the search for a coalition is on. President Erdogan has been meeting opposition lawmakers - he says he's open to all possibilities. The right-wing Nationalist Movement Party or MHP is seen as the AKP Party's most likely partner. Will Hobbs is from Barclays. (SOUNDBITE) (English) WILL HOBBS, HEAD OF INVESTMENT STRATEGY, EUROPE, BARCLAYS CAPITAL, SAYING: ''We can see the AKP forming a coalition with the right, and probably continuing to pursue populist policies, broadly speaking. But for us, it has to be said that Turkey is not a currently a preferred investment destination.'' Meaning less foreign investor spending on the lira presumably - which despite a small gain on the growth numbers, may once again be set to head downwards.

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Political clouds over Turkish economy

Wednesday, June 10, 2015 - 02:02