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Business

Turkey's political turmoil casts a pall on economy

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Opening sequence

Business

Turkey's political turmoil casts a pall on economy

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COMING UP:Turkey's political turmoil casts a pall on economy

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Transcript

00:00:00
>>
SOUND] I
's the biggest weekly fall for the Lira in over a year, the Turkish currency feeling the fear of trouble at the top after Prime Minister Ahmet Davutoglu announced he was stepping down due to disagreements with the President. Tayyip Erdoğan is moving to create a powerful executive presidency.
00:00:18
But instability spells nervous investors at a time when the Turkish economy already needs help. Nicolas Tattersall is Reuters' bureau chief in Istanbul.>> What they're specifically worried about is the shape of any changes to the economic management team under a new prime minister. They're worried that that may derail badly needed structural reforms in the Turkish economy.
00:00:40
And they're also concerned that allies, staunch allies of President Erdogan, some of his economic advisors may have a bigger role. Some of that camp has a more unorthodox view of monetary policy. They believe that interest rates need to be cut, despite high inflation in Turkey, to fuel consumption led growth.
00:01:04
>> The outgoing prime minister insists investors should not worry. Because a, quote, strong AK party government will continue. But critics say the President's ambition for a new constitution could speed up elections and shift the country to a more authoritarian rule.>> He is an advocate of low interest rates to fuel growth, he wants to see growth above all.
00:01:27
That is sometimes at odds with the sort of structural reforms that foreign investors want to see in the long term in the Turkish economy. Things like reforms in the labor market, an increase in the savings rate in Turkey and efforts to boost productivity. So the concern is that if Erdogan tightens his grip over economic policy, he will favor measures to promote consumption led growth at the expense of those deeper reforms.
00:01:55
>> If Turkey back to the polls, it could be the third parliamentary ballot in less than 18 months. Advisors say a replacement for the PM could help stabilize the economy if the President has an ally at his side.