İmamoğlu arrest
March 26, 2025
Economic Panaroma
Invist Strategic Conculting
Economists express concern over Türkiye’s economic
stability following the arrest of Istanbul Mayor Ekrem
Imamoglu.
Professor Selva Demiralp of Koc University
highlights potential consequences such as increased
exchange rates, inflation, and interest rates, coupled with
slowed economic growth. She notes that approximately
$25 billion in reserves were utilized within three days
post-arrest, eroding 38% of the net reserves accumulated
over two years. Demiralp warns that the Central Bank
may need to raise interest rates to counteract exchange
rate pressures, emphasizing that political instability
undermines investor confidence and could elevate
Türkiye’s international borrowing costs.
Similarly, Professor Aykut Lenger observes a sharp decline
in the Istanbul Stock Exchange and a rise in the country’s
risk premium, attributing these to foreign investors’
distrust in Türkiye’s political and economic landscape.
He anticipates ongoing market unrest, suggesting that
the Central Bank’s tools may be insufficient to address
prolonged instability.
According to a CNBC analysis by Natasha Turac, political
turmoil has heightened investor anxiety, with fears of
capital outflows and reduced economic confidence.
Experts warn that continued instability may lead to
inflationary pressure and require further interest rate
hikes to stabilize markets. The current environment
has also raised concerns over whether rule of law and
democratic norms are being upheld, which could affect
Türkiye’s international standing. Some observers suggest
Ankara may feel secure in acting assertively due to limited
expected backlash from key global partners. The situation
has prompted calls for transparency and restraint to
protect economic recovery. The outlook remains fragile
as political developments continue to impact financial
markets.
Economist Mahfi Egilmez, in his article titled “As We Enter
a Troubled Period”, analyzes the economic repercussions
following the annulment Ekrem Imamoglu’s diploma, his
subsequent detention, and arrest. Egilmez notes that these
developments, anticipated by the political administration,
elicited a stronger public reaction than expected. Drawing
parallels to prolonged student protests in Türkiye during
the late 1960s and 1970s, Egilmez suggests that without
addressing underlying issues—such as ensuring judicial
independence, transitioning to genuine democracy, and
implementing merit-based appointments—current unrest
may persist. He emphasizes that resolving these systemic
problems is crucial for economic stability and recovery.
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