Some Central European (CE) governments have gradually lifted restrictions, as vaccination efforts ramp up, which should gather further pace in May and strengthen economic resilience. The CE region has also seen an increase in planned investments in electric vehicles (EVs), which will likely accelerate as the EU continues to pursue a more aggressive push for green energy. In Turkey, the government has decided to lift import tariffs on some raw materials and goods, which may ease operational costs for firms that have localized in the market. Keep reading for trends to monitor in Turkey, including the Turkey currency crisis, and what your business can expect from the rest of 2021 and beyond.
The Turkey currency crisis is top of mind for multinational executives this year. The Turkish lira fluctuated between TRY 8–8.4 in late April. The central bank’s decision to hold interest rates under the new governor helped prevent a significant depreciation of the lira; however, the bank’s removal of emphasis on tight monetary policy and willingness to hike rates to limit volatility, reduced confidence in the market toward the future of lira-denominated returns. Slightly higher foreign debt payments due in June, alongside potential tensions with both Russia and with the US could add further volatility risk.
Looking Ahead – What Should Your Business Do?
Monitor the government’s plan to gradually lift restrictions from May 17 onward. After seeing 60,000 new COVID-19 cases daily, the government imposed a full lockdown until late May. While the plan is to open in June, monitor the daily vaccination rates until then, while planning for the ongoing risk of restrictions returning in the summer months.
The situation in Turkey remains uncertain, with continued pressure on the country’s currency exacerbating macroeconomic vulnerabilities. Companies need to focus on building resilience within their Turkey businesses and understand the potential spillover effect on their business outside of Turkey. Read our latest Central Europe Market Monitor for the three major developments in the market between April and May.
For more information on volatility in Turkey, watch Managing Director and Head of Research, Martina Bozadzhieva, on CNBC. You can watch the full clip on CNBC here.
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