Turkey’s stock exchange closed this morning for the first time in 24 years to prevent a $35bn (£29bn) selloff this week from turning into a rout. The move followed a panic among foreign investors in the wake of the massive death toll and at least $1bn worth of damage to buildings from the strongest earthquake to hit the country in the past 100 years. “Our stock exchange has decided to halt trading in equities, futures and options markets,” Borsa Istanbul said in a statement after market-wide circuit breakers had halted trading twice. The exchange was unable to say when trading would resume. Investors were disenchanted with Turkey before the earthquake after a series of statements from president Recep Tayyip Erdoğan’s government that it would resist after the economic policies adopted by the big industrialised economies. The controversial leader, who has attempted to increase trade and aid to his country in talks with both Washington and Moscow during Russia’s invasion of Ukraine, has refused to increase interest rates to tackle runaway inflation. The Turkish lira collapsed after Erdoğan forced the central bank to cut rates to spur growth as the country came out of the Covid-19 pandemic. The injection of cheap money into the economy pushed inflation to record highs. Turkey’s annual inflation rate fell sharply in December, but only to 66.8% from 84% in the previous month before falling again in January to 58%. It was 49% in the same period last year. A Reuters poll found that most City economists believe inflation will still be as high as 43.2% by the end of 2023, double the level predicted by the finance ministry in Ankara. Treasury and finance minister Nureddin Nebati told Bloomberg in an interview before the earthquake that he rejected Wall Street’s prediction of a U-turn by the administration following May’s local elections. He said the “independent” central bank would keep cutting rates as inflation slows and maintain them at low levels, adding that this was in line with his country’s new economic model. Before the earthquake, Turkey was expected to be forced to seek external funds to finance its growing current account deficit. Government bond prices have plummeted this year, pushing up the cost of borrowing to among the highest in the developing world. The pressure from investors for a rise in interest rates – which is the price they demand for repatriating their funds back to Istanbul – is likely to become more intense after the earthquake. Shabbir Ansari, a senior insurance analyst at GlobalData, said: “The preliminary estimate of economic loss due to the current catastrophic event is more than $1bn, and it will take years for Turkish insurers to settle the insured losses. The economic loss is expected to be more than two times the losses from a similar earthquake in 2020.” He said insurers in Turkey were already reeling under the pressure of high inflation that affected their profitability. High inflation rates pushed the average cost of claims for insurers higher. “As companies are yet to recover from the impact of the 2020 earthquake, the recent earthquake will further impact the profitability of property insurers. As a result, Turkish property insurers are expected to register underwriting losses in 2023 and 2024,” he added. The benchmark Borsa Istanbul 100 Index has lost 16% this week, shedding almost $35bn from share values. Turkish stocks, which are this year’s worst performers globally, entered a technical bear market on Tuesday after falling more than 20% from their January high.