Confidence in Turkish assets up as risk premium falls

WASHINGTON- Anadolu Agency

Turkey's risk premium in international markets saw a significant fall as the country returned to orthodox economy policies.

With the change in economic management and the reform process initiated by President Recep Tayyip Erdoğan, the country's five-year Credit Default Swaps (CDS), which is one of the main indicators of risk premium, declined by 194 basis points from 548 to 354 since the end of October.

Uğraş Ülkü, the head of emerging markets European research unit at Institute of International Finance (IIF), told Anadolu Agency that recent monetary simplification and a return to orthodox policies helped improve investors' confidence in Turkish assets.

"Maintaining a tight monetary and orthodox policies in the coming months will help Turkey restore stronger market confidence," Ülkü added.

Stressing that Turkey’s risk premium could fall further due to the new orthodox policy framework, he said: "It depends on Turkey to reduce imbalances and to restore market confidence."

Ülkü noted that this would primarily allow Turkish banks to access foreign financing under more favorable conditions to finance robust and less volatile growth in the medium term.