Both the protests and the market fallout could have been worse, Deutsche Bank strategist Jim Reid said in a note to clients on Monday.
“The fact that he wasn’t charged with terrorism means the news isn’t as extreme as it could have been,” he argued, noting that “such a move would have led to the appointment of a trustee to the Istanbul Municipality, risking more protests and unrest.”
Turkey’s interior minister said on Monday around 1,100 protesters have been detained in total so far.
Déjà vu all over again
The events have revived fears — never far from the minds of investors in Turkish assets — that the country will slide into outright autocracy and that the government will again ride roughshod over them in Erdoğan’s efforts to entrench himself in power.
Foreign investors and many domestic businesses are still licking their wounds after Erdoğan secured reelection with a wild spending spree that led to inflation peaking at over 80 percent in 2024. Erdoğan’s crackdown on political opposition after a failed coup in 2016 had likewise led to a sharp lira devaluation and big losses in local markets at the time.
However, in contrast to both of those episodes, analysts say the Turkish economy is currently on a relatively solid footing: Inflation has been falling steadily and confidence in the domestic banking system has been rising. The current account deficit, typically the Achilles’ heel of the Turkish economy, has run at less than 4 percent of gross domestic product in the last three months, according to JPMorgan analysts.