Turkey’s Finance Minister meets foreign investors

On September 19, Mehmet Imşek, Turkey’s esteemed Treasury and Finance Minister, will speak to a select group of foreign investors at a Goldman Sachs-organised event in New York. This high-profile rendezvous comes at a critical juncture as Turkey’s Central Bank is poised to unveil its much-anticipated rate decision later in the week.

Foreign investors, who had once treaded cautiously in Turkish markets, have begun casting their gaze back towards this dynamic nation. The rekindled interest stems from the appointment of a new economic leadership following the May elections. A seminal moment in Turkey’s economic landscape was the unveiling of the government’s new medium-term programme earlier this month.

Minister Şimşek, in a resolute statement on September 15, underscored the central tenets of the new programme, emphasising the imperatives of sustained inflation reduction, disinflation, and the attainment of price stability. “We are determined to fight inflation to put Türkiye back on a high, sustainable, and balanced growth path… We must first establish macro-financial stability. Fiscal and monetary policies will be harmonised,” he affirmed.

On the horizon looms the pivotal Central Bank rate-setting meeting scheduled for September 21. Analysts are closely monitoring this event, with some speculating the possibility of a 500 basis points increase in the main policy rate. The Central Bank has already wielded its policy tools this year, notably elevating the one-week repo auction rate by a substantial 1,650 basis points to reach 25 percent.

Foreign investors, privy to the transformative measures implemented in recent months, are reportedly optimistic about Turkey’s economic prospects. Officials suggest that foreign interest in the Turkish economy is set to burgeon in the coming period.

Kerim Kotan, an authority from Ventura Partners, a firm specialising in M&A transactions, noted the perceptible shift in foreign investor sentiment. “Six months ago, foreign investors were not interested in Türkiye, but now this is changing,” he observed. Kotan emphasised the urgency of maintaining transparency and predictability as vital components in luring record levels of foreign direct investments (FDI).

Kotan predicted that the volume of M&A transactions would approximate $10 billion this year, with potential for FDI to surpass the $20 billion benchmark achieved a decade ago, provided that economic management remains stable in 2024 and 2025.

In the realm of foreign investments, Kotan highlighted the appeal of export-oriented companies that demonstrate competitiveness and produce high-quality goods. Investors, he explained, are equally concerned about market entry barriers, political and economic stability, global competitiveness, and the ease of conducting business.

M&A transactions in Türkiye have encountered fluctuations over the years, declining from the heights of $20 billion to $25 billion in 2012-2013 to the more modest levels of around $10 billion in 2021-22. Kotan attributed this trend to geopolitical uncertainties, credit rating fluctuations, and shifts in economic policies.

However, Kotan expressed optimism about Türkiye’s economic trajectory, predicting the potential for remarkable economic success within the next one or two years. He ventured to foresee the return of foreign private equity funds and investment banks that had vacated Turkish shores in the past seven to eight years, envisioning a resurgence of interest in the nation.

Kaan Nazlı, a senior economist at Neuberger Berman, pointed towards Türkiye’s energy and defence sectors as focal points for foreign investors in the foreseeable future. Nazlı suggested that inflows into Turkish stocks could sustain momentum with the normalisation of economic policies.