The reason for Turkey’s economic precariousness—it is by far the worst performing emerging market this year—is no secret: Over the long term, markets react favorably to certainty and crumble in the face of haphazardness. In the short term, though, they have a tendency to spring up when positive news surfaces, however unlikely that news is to lead to actual benefits
It thus came as no surprise that Turkish President Recep Tayyip Erdogan’s Nov. 11 pledge to take Turkey down a new economic route drove the Turkish lira to its highest rate against the dollar in almost a month. His speech came on the heels of a shakeup in the Turkish economic apparatus, including the firing of the governor of the Turkish Central Bank and the departure of Berat Albayrak, Turkey’s finance minister and the president’s son-in-law. Although investors greeted this news with great fanfare, with both Citi and Societe Generale banks improving their outlook on the lira for the first time in a while, there is reason for caution.
