Turkey turmoil tests Gulf investors as crackdown fuels market unease
Improved relations with Saudi Arabia and the United Arab Emirates had raised Ankara's hopes for a dealmaking boom, but the arrest of Istanbul's mayor could jeopardize it.
With Turkey’s economy facing new uncertainty following the political crackdown launched by the government of President Recep Tayyip Erdogan, Gulf states could be among the investors scared off by the market turmoil, potentially imperiling Ankara’s hopes for a dealmaking boom powered by recently restored relations with Saudi Arabia and the United Arab Emirates.
The March 19 arrest of Istanbul Mayor Ekrem Imamoglu, Erdogan's main political rival, sparked uproar and roiled Turkish markets, sending stocks and the lira tumbling as investors fled. Imamoglu's detention and the public's response to it swiftly jeopardized the country’s ongoing economic recovery, which had been gaining traction amid efforts to tame inflation and win back foreign investors.
With this rebound suddenly threatened, authorities have scrambled to reassure investors and avert a resurgent financial crisis, with the Central Bank reportedly selling some $28 billion in foreign currency in the ensuing days to support the lira.
Among wary investors, some of the Gulf states will loom especially large if economic conditions continue to erode. Prior to the current volatility, lifelines from Qatar, Saudi Arabia and the UAE had proved critical to Ankara as it navigated the severe financial crisis sparked in 2018 by geopolitical tensions, debt problems, inflation and other pressures. Their assistance helped pave the way to recovery starting in 2023, when the new finance minister, Mehmet Simsek, turned Turkey back toward orthodox economic policies.
