Notwithstanding the politically motivated and premature decisions by credit rating agencies, Turkey’s macroeconomic fundamentals remain strong.
The coup attempt was unorthodox because it was executed outside of the chain of command, ie not by orders from the central command of the Chief of Staff, but rather by military units controlled by Gülenist coup plotters from different divisions within the military. As such, lower-ranking officials with senior positions in the religious order were able to give orders to higher-ranking Generals. It was also unorthodox in terms of the scale of organized violence used against state institutions, security personnel and the civilian population. Unprecedented events, including the bombing of the buildings of the Parliament (TBMM), National Intelligence Organization (MİT) and Police Special Operation Department (PÖH) by F-16 fighters commandeered by the coup actors, an attempted assassination of the President and the use of attack helicopters, heavy artillery and tanks against civilians; all these distinguish this coup from predecessors. The wide scope and diversity of the democratic reaction to the coup was also unique in Turkish political history, as civilians in both urban and rural centers, with municipal workers and NGO, acted together to resist the initiative that planned to pull Turkey down to the conditions of a third-world country.
While the coup attempt was foiled by the strong leadership of President Erdogan, together with a powerful reaction by the police force and the sacrifices made by civilians, with the human cost of around 250 martyrs and two thousand wounded people, its impact on the economic structure of Turkey has been critical. Turkey was caught by this heinous coup attempt while the economy was recovering from sluggish growth, attempts in foreign policy normalization were advancing and strong growth prospects were expected for 2017. Strong macroeconomic fundamentals and effective crisis management by the Central Bank (CBRT) and economic bureaucracy meant that the immediate impact on banking and the financial sectors was successfully kept to a minimal level. Despite the temporary rise in exchange rates, the stock exchange did not experience a collapse in the value of the traded stocks and there was no speculative attack or exodus of international investors. The rise in the credit default swaps (CDS) figures during the coup attempt, which reflects the perception risk of the country, was roughly equal to the rise observed when previous Prime Minister Davutoğlu declared his resignation.
Every coup attempt creates multifaceted social, political and economic costs, and the July 15 coup attempt by Gülenists is no exception. Policy makers in Turkey are adamant to keep these costs at a minimum, hence the emphasis placed by both President Erdogan and the government on the maintenance of fiscal discipline, structural reforms and incentive packages designed to boost domestic and international investments. Notwithstanding the politically motivated and premature decisions by credit rating agencies, Turkey’s macroeconomic fundamentals remain strong and growth prospects look bright for the medium term.