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%.

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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.

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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.

Marina Gerner

Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.

Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.

Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.

Marina is trilingual and lives in London.

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