Four events to set course of economy in 2017

The world economy was shaken by Brexit, and at the same time most countries’ economy leaders felt the stress of the Fed getting ready to up the interest rate. The uncertainty brought about by Donald Trump’s presidential win in the US only added to existing concerns. Nearly all the world’s economies and global trade were negatively affected by these developments and amidst all this, Turkey has had to struggle with its own unique problems. The Turkish currency has lost nearly 20 percent against the dollar and 15 percent against the euro this year. Overall, it’s been a bad year and we are glad it’s over. But what will it be like in 2017 for the global economy and for Turkey? According to a report from the renowned investment bank Bank of America Merrill Lynch, the Turkish economy isn’t headed for bright days next year. The report, published in December, lists the annual ranking of emerging markets and includes an outlook for 2017. It puts Korea at the top of the healthy growers, while it says stagflation and debt are a drag on Brazil, Turkey and South Africa. The report refers to Turkey, South Africa and Brazil as the “Fragile three.”
Turkey ranked 55th among 56 countries
According to the report, “South Africa is still bottom among the GEM-10 due to stagflation, twin deficits and high debt across sectors. Turkey remains the second-weakest major due to external vulnerability: the net external position vs international banks to GDP ranks now 55th out of 56 markets; note though that Hungary was at a similar level only two years ago. The fiscal balance and public debt remain Turkey’s relative strong points. Brazil has managed to widen the distance from Turkey and South Africa owing to improving account and debt indicators, and continues to have one of the best levels of reserve coverage in emerging markets.”
If we turn our attention back to Turkey, four significant events in 2017 are expected to shape the markets. Economists say that Jan. 20 — when Trump will be inaugurated as President — and its aftermath bear great importance for financial markets. Trump’s statements about his planned policies during his presidential campaign, which he repeated after his election victory on Nov. 8, had caused a major fluctuation in the markets. Ater Jan. 20, it will become evident whether his policy suggestions will play out in reality.
European elections
Economists assert that even if Trump actually carries out economy policies in line with his promises, his steps will not fundamentally differ from classical US policy. However, they also note that it is likely possible that Trump will go for a more independent policy implementation and that it is highly likely that he, together with his own team, can take more distinctive steps; which would be slightly unexpected for financial markets. The next Fed meeting scheduled on March 14-15 o will give important clues as to whether it will go for a sharp policy in interest rate policy.
In Turkey, a planned referendum in late March or early April will be a determining factor for market developments. Lastly, elections will be held in Germany and France in 2017. Economists say that right-wing political parties winning or gaining strength in these elections might profoundly affect even EU-Turkey relations. In summary, economists say that these factors herald a “negative story” or “strong uncertainty,” noting that expecting a positive trend in Turkish markets at such a time would be overly optimistic. Economists recommend investors and businesses to remain cautious and direct their financial assets towards liquid investments.