Turkey is in trouble again

Emerging-market investors have turned their attention to Turkey again. The Turkish lira has slipped to an eight-month low against the US dollar; this follows a slump of 40% in the first eight months of last year.

President Recep Tayyip Erdogan, Turkey's increasingly authoritarian leader, has often accused foreign powers of orchestrating the currency crisis. Turkey has charged JPMorgan with "causing volatility" that prompted a run on the Turkish lira, says Carlotta Gall in The New York Times.

In truth, the sell-off shows that factors driving last year's currency crisis, such as geopolitical tensions and domestic policy, haven'tgone away, says Jason Tuvey on Capital Economics.

Start your trial of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up for MoneyWeek’s free twice-daily newsletter.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.

Sign up

Erdogan has picked another fight with the US, criticising Donald Trump's intention to recognise the Golan Heights. Meanwhile, his habit of putting pressure on the central bank to keep interest rates low is a recurrent headache.

The Turkish economy shrank by 3% in the fourth quarter of 2018 and inflation has reached almost 20%. It now seems the pace of economic contraction is "starting to ease", says The Economist. But a cyclical recovery won't resolve longer-term issues such as cronyism and mismanagement. The worry is that "populism, not liberalism, represents Turkey's factory settings, to which it has returned" after a few years in which it appeared to be embarking on the path ofpro-market reform.