FEDERICA CLERICI
FUND MANAGER
BCC RISPARMIO & PREVIDENZA
Score prediction: TURKEY 1 – ITALY 2
INVESTMENT INSIGHT:
Following the stagflationary panorama that affected Turkey during the late 2010s, the coronavirus outbreak turned out to be one of the most violent across Emerging Europe.
However, the pressures on the economy triggered a prompt sequence of policy responses, as well as a rising degree of self-awareness concerning the ongoing internal and external imbalances.
A package of loan guarantees to firms and households, tax deferrals and reductions, and employment support schemes (worth 12% of GDP) supported a strong rebound in economic activity between 2020 and 2021.
As a result, the covid crisis did not mark a recession for Turkey: unlike most emerging and developing economies, real GDP growth in 2020 turned out to be positive (+1.8%) and projections for 2021 are aligned near 6%.
Moreover, by the beginning of June, more than 15% of the Turkish population is fully vaccinated, which is close to the 19% scored by the European Union: after a strong deceleration in daily cases, a gradual reopening is taking place, including borders.
The imbalances in the country’s fiscal and monetary accounts determined a one-off nature of the stimulus measures: in order to avoid further depreciation of the Turkish lira, policy rates were gradually hiked as soon as the pick-up in inflation intensified in early 2021.
Thanks to a clear communication strategy the central bank strengthened its credibility despite multiple episodes of government interference: the current hawkish stance avoided excessive credit growth, currency reserve depletion, and inflation spillovers from producers to consumers
DAVID KARNI
HEAD OF PORTFOLIO MANAGEMENT
BCC RISPARMIO & PREVIDENZA
Score prediction: TURKEY 1 – ITALY 3
INVESTMENT INSIGHT:
The green and digital transformation plan Italy has presented is ambitious, and like other European countries, alligned with the objectives of Europe as a whole.
In the plan, 37% will be dedicated to green projects, such as energy transition or alternative vehicles, and 20% to digitalisation so Italy can improve, be more efficient and allow businesses to develop.
One important part will be dedicated to reducing inequalities: it is known that Italy is a country of “old people” and we need reforms to help young people so they don’t become overwhelmed by debt and do not pay into pensions .
Italy is expecting a long path of structural reforms, ranging from justice to fiscal, and now is the right time to, on one side, force Italy to be more alligned with Europe and, from the other side, for Europe to create a new framework in order to mitigate differences between countries.
