Is Turkey’s Economy About To Crash?

A woman changes money at a currency exchange office in central Istanbul, Turkey, May 23, 2018.

Washington Post: Turkey’s economy looks like it’s headed for a big crash

It might seem strange to worry about an economy that grew 7.4 percent last year, but despite — or rather, because of — that good news, Turkey is showing all the classic signs of an emerging markets crisis.

It’s pretty simple. Turkey has and continues to borrow a lot of dollars that are getting harder to pay back now that its currency is falling fast. Or, more specifically, its banks and companies have. But, in any case, the fact that its government hasn’t built up a big rainy-day fund of dollars has left it with a catch−22: Turkey can either try to save its economy from the effects of a weaker currency by increasing interest rates, or from the effects of higher interest rates by allowing its currency to continue dropping. Which is to say that it really has to decide how it doesn’t want to save things.


Update #1: Turkey’s Economic Policy Stokes Currency Fears as Lira Plummets (VOA)
Update #2: Turkish bankers try to drag Erdogan toward monetary sanity to no avail (Desmond Lachman, The Hill)

WNU Editor: When I read that Turkish President Erdogan had appointed his inexperienced son-in-law Berat Albayrak to be finance and treasury minister to manage Turkey’s fragile economy …. I said to myself that this is not going to end well.

Hat tip Fred for this link.

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