Features

Turkey is in trouble again

Turkey's currency has slipped to an eight-month low against the US dollar, after a 40% slump in the first half of last year. The economy shrank by 3% in the fourth quarter of 2018 and inflation has reached almost 20%.

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.

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.

Recommended

Bullish investors return to emerging markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Beware the hidden risks when investing in emerging markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Emerging markets: buy when the news is bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Gold and silver have taken a vicious beating – is the bull market over already?
Gold

Gold and silver have taken a vicious beating – is the bull market over already?

The gold price has tumbled recently, leaving traders nursing losses – just a nasty correction or has the gold bull market run out of steam? Dominic Fr…
12 Aug 2020
No, the UK did not “plunge” into recession yesterday
UK Economy

No, the UK did not “plunge” into recession yesterday

That the economy took a massive hit due to Covid-19 should be news to no one, says John Stepek. The real question is what happens now.
13 Aug 2020
Eagle Lightweight GT: the reincarnation of the E-type Jag
Toys and gadgets

Eagle Lightweight GT: the reincarnation of the E-type Jag

Jaguar’s classic E-type sports car has been reinvented for the modern age. The result – the Eagle Lightweight GT – is a thing of beauty.
7 Aug 2020