Opposition Gains To Prompt Policy Re-Think

Policy uncertainty is set to rise in Turkey as the governing Justice and Development Party (AKP) lost ground in local elections held on March 29. While we still expect the passage of an IMF Stand-By Arrangement in the short term, we caution that the risks of a slowdown in the EU convergence and market reform agenda have risen in line with the electoral gains made by the centre-left and nationalist opposition parties. A cabinet shuffle is looking likely, which when announced, will be a key indicator of the medium-term policy direction.

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