Businesspeople who invest in Turkey were unimpressed by Moody's recent ratings cut in light of the country's favorable demographics and good growth potential, said Carsten Hesse, strategist at Berenberg banking and investment, on Thursday.
Hesse spoke to Anadolu Agency about the structure and future of the Turkish economy and related recent developments.
About the Moody's rating cut decision, he said, "We have seen in previous cases that bond yields trade independent of credit ratings, as credit rating agencies have a tendency to be late in their decisions. Professional investors make their own decisions if a country is attractive for investments or not, independent of credit rating agencies' views."
"Another sign that investors were unimpressed by the downgrade is that we saw yesterday the strongest demand for a new issuance of a Turkish 10-year bond in almost two years," he added.
Hesse stressed that there are six main challenges the Turkish economy faces to reach higher levels.
"Increasing exports and reducing import growth to balance the current account in the long-term comes first. Rising investments into schools and universities in order to improve education levels to increase convergence speed to EU levels is the second challenge," he said.
"Fighting corruption and strengthening the rule of law is another important point, while planning new investments in renewable energies to reduce imports of oil and gas," he said.
On final steps, Hesse said, "Making more investments to improve the infrastructure, and attracting more foreign direct investments are the fifth and sixth challenges of the Turkish economy."
Hesse stated that Turkey's economy has good growth potential for the coming years as it continues its long-term convergence to Western European levels.
- Many young people, few retirees
"Turkey is also very attractive due to its favorable demographics, lots of young people compared to the number of pensioners, and population growth, while in most other European countries we see negative population growth," he said.
The veteran strategist also stressed Turkey's relatively low debt levels, adding, "Therefore there is still room to boost investments and growth. An update of the customs union deal with the EU could also be a big boost for Turkey's future."
On the environment after the July 15 defeated coup, Carsten Hesse said that the incident would be quickly forgotten if Turkey offers attractive opportunities for foreign investors.
"Investors are used to political risk in the whole region, but they can overlook this if there are very interesting investment opportunities and they are treated fairly," he said.
Hesse stressed the importance of dialogue with international businesspeople, saying, "It was definitely very much appreciated by investors that e.g. President [Recep Tayyip] Erdogan met with institutional investors in New York last week and other government officials met with investors e.g. in London to provide reassurance."
"For property and foreign direct investors it is crucial to have long-term stability as most of their investments will only pay back in the long-term. Definitely the low wage level and Turkey's position as a hub for the Middle East is of interest for a lot of foreign investors," he added.
* Writing and contributed to by Muhammed Ali Gurtas from Ankara.
Source: Anadolu Agency