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The Constitutional Court's decision is expected to give relief to financial markets and to help the upward trend seen during the week, economists and analysts said on Wednesday.
"This is the best possible outcome for the markets in my view. The AKP has basically been found guilty but its punishment will not be closure. It will be punished financially. Markets will respond to this positively and it’s in line with our view," said Lehman Brothers economist Tolga Ediz, who predicted the party would not be closed ahead of the ruling.
Financial markets had traded higher on expectations the party would not be banned on Wednesday. The lira was up 2 percent earlier in the day and stocks had gained almost 6 percent.
With this political uncertainty lifted, Turkish markets are expected to rally from recent levels. “The long term implications for the AKP after removal of treasury aid is very little, if any damage... This verdict amounted to little more than a slap on the wrist,” Royal Bank of Canada said.
Turkey's Constitutional Court rejected demands to close the ruling Justice and Development Party (AKP) in its critical ruling released on Wednesday. Instead the court sent the party a "serious warning" by cutting half of the Treasury funds it was entitled to this year.
This ruling ended an eight-month long period of political uncertainty in Turkey, which increased at a time when global conditions worsened. Investors had sold Turkish assets after the closure case was filed in March.
Analysts do not expect the tension to rise in the near future but warn that the ruling does not mean that new problems between the AKP and its opponents would not emerge.
“Going forward, the key thing to watch will be AKP’s response to this decision. More specifically, we will be watching whether AKP will feel encouraged to pursue a more controversial agenda or opt for a more inclusive stance that will ease the worries of secularist establishment and voters,” Inan Demir, Finansbank economist also said in a statement.
The lira rose to 1.17 to the dollar, a three-month high, after the decision. Turkey's stock and bond markets were closed when the court’s ruling was announced.
"I think this is a solution that will satisfy all sides," Yarkin Cebeci, an economist at JPMorgan Chase in Istanbul told Bloomberg. "The party will remain in power but will see that it is not omnipotent."
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