Could the referendum alter the key macro themes?

Geoff Dennis, strategist, UBS

Dünya Executive - - REPORT -

A “yes” vote may help to create the conditions for higher-quality capital-account flows and could support domestic demand by reducing domestic uncertaint­ies. Over the medium-term, however, we believe structural economic reforms are needed to improve Turkey’s competitiv­eness and address structural deteriorat­ion in the balance of payments. The impact of a “no” vote (would have) likely resulted in much greater uncertaint­y, weighing on the lira and other asset classes, requiring further monetary tightening and creating downside risks to growth. Market pricing appeared skewed towards a “yes” vote, but not sufficient­ly so as to preclude a tactical short-term relief rally post the outcome. The lira is the worst-performing emerging-market currency year-to-date. We think the lira could appreciate a further 2 percent to 3 percent in the near term on this outcome. Longer term, low real rates, likely current-account deteriorat­ion amid an expanding credit impulse and limited competitiv­eness and a weaker capital-account financing structure keep us cautious on the lira, equities and local debt more structural­ly. (April 13)

Newspapers in English

Newspapers from Turkey

© PressReader. All rights reserved.