Turkey’s economic goose may be cooked

"After centuries of default and economic instability, Turks are very savvy when it comes to protecting their savings," Renaissance Capital's Charles Robertson told the Financial Times. They clearly think a major bout of turbulence is on the way: according to the World Gold Council, demand for gold jewellery, bars and coins jumped by 34% year-on-year in the first quarter of 2018.

The reason? If markets have lost patience with Argentina, the odds are Turkey won't be far behind. Boom may be turning to bust. After expanding by 7.4% last year, a figure achieved with a consumer borrowing spree and high state spending, growth looks set to weaken: the latest PMI survey of manufacturing activity points to a contraction. The current-account deficit of 5% is very high compared with most emerging markets, and the risk of the foreign capital the economy requires to plug the gap is high.

The increasingly authoritarian president, Recep Tayyip Erdogan, may be inclined to introduce fresh fiscal stimulus before elections due in June, making the overheating and ultimate bust worse. More importantly, however, he has long been at loggerheads with the central bank. The upshot is that nobody has confidence in the bank's ability to squeeze out inflation of over 10% or reverse a slump in the currency; Erdogan makes very clear that he wants lower rates to keep boosting growth.

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Turkish stocks have lost 20% this year and the Turkish lira has slipped by more than 10% against the US dollar, reaching new all-time lows in the past few days. Last week alone it slumped by 5%.

With the overall atmosphere in emerging markets going sour, says Richard Barley in The Wall Street Journal, "the risk is that Turkey's slow-burning crisis gets a lot hotter".