Turkey's economic confidence surges in July despite coup plot

Turkey's economic confidence index in July rose by 14.9 percent compared to the previous month, signaling no damage to trust in the country's economy after the July 15 coup attempt. According to official data released by the Turkish Statistical Institute (TurkStat) on Thursday, Turkey's economic confidence index increased from 83.33 in June to 95.73 in July.

The upward trend indicates that the Turkish people's trust in the economy went undamaged after the July 15 coup attempt, according to analysts. Reports show that improvement in the confidence index was driven by increases in all sub-indices except consumer confidence, including services, retail trade, construction and real sector confidence.

The services confidence index increased to 100.86, the retail trade confidence index increased to 103.56, the construction confidence index increased to 82.95 and the real sector confidence index increased to 106.3 in July. The construction confidence index also saw a 2.5 percent rise to 82.95 with a 1.9 percent improvement in real sector confidence to 106.3 in July. Among sub-indices, consumer confidence index saw a deterioration of 3.5 percent, slipping from 69.43 to 67.03.

The economic confidence index is seen as a significant reading for the course of the economy as it is a composite index that aggregates sub-indices of consumer confidence, real sector services, retail trade and construction confidence indices, reflecting overall sentiment towards the health of the economy.

"The confidence is probably a solidarity response by the people," economist at Ziraat Securities Bora Tamer Yılmaz told Anadolu Agency. "The citizens have full faith in the government and other institutional economic policy agents, such as the bank's association or the central bank," Yılmaz said. "Evaluating recent developments as an attack on their own soil, people prefer uniting around a common cause instead of shying away and expressing pessimism," he added.

On Wednesday, Deputy Prime Minister Mehmet Şimşek said that more than $9 billion worth of foreign currency in Turkey has been changed to Turkish lira since the July 15 coup attempt. Şimşek credited the switch to lira by Turks as protecting the economy following the attempt to overthrow the government. "The Turkish people who stopped the July 15 coup attempt [also] defeated the coup in the Turkish market by exchanging their foreign currency to the value of $9 billion," Şimşek said.

Yılmaz said the resilience of the Turkish lira, which did not sharply pass its historic high, reflects the level of confidence people have in Turkey's economy. "After approaching a 3.10 level, [the] lira has recovered some of its losses and pulled back towards a 3.01 level," Yılmaz said. "We have observed that households have switched to local currency, selling their foreign denominated savings.

"The quick response of the authorities, ensuring the healthy functioning of the markets, also calmed down concerns, boosting confidence in the economy," Yılmaz added.

KapitalFx analyst Enver Erkan said that July's economic confidence index reveals sub-indices, such as the services, retail trade, construction and real sector, were the main reason for the huge surge. Erkan said the data belongs to the first two weeks of the month. "We will see the main effect of the July 15 coup attempt in next month's data; maybe one time fluctuation could be seen, but we do not expect a long term," He also said. "Confidence indices will maintain the current trend throughout the year. As a result, we did not revise any of our economic forecasts."