Recep Tayyip Erdoğan’s strong showing in Sunday’s election has prompted rating agencies to warn of a fresh sell-off in the lira if the Turkish president continues his “unsustainable” economic policies.
Turkish assets have sustained a blow after Erdoğan beat his rival Kemal Kılıçdaroğlu in the first round vote, heightening his chances of prevailing in a May 28 run-off. The cost to insure Turkey’s debt against default has jumped over the past two days, with the “spread” on five-year credit default swaps rising to 646 basis points from 506bps on Friday.
The selling in Turkish assets came as investors reversed bets that Kılıçdaroğlu, who led in pre-election polls, would bring Turkey back to a conventional economic policy, undoing a patchwork of programmes that have been put in place under Erdoğan’s leadership.