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Turkey’s election: Q&A on an opposition victory

There’s a lot of optimism that the opposition will emerge victorious in Turkey’s elections, which would pave the way for a return to orthodox economic policy. Were this to happen, it would set the foundations for much lower inflation, sustainable medium-term growth, a reduction in Turkey’s risk premium and lira appreciation further down the line. But the scale of the challenge is huge. Lowering inflation will require years of very tight fiscal and monetary policy (and weak growth) and we think the lira will still need to depreciate this year to address macro imbalances.

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