- Turkey Faces Tough Choices as It Teeters on Brink of Economic Collapse
by Deena Kamel, https://www.thenational.ae/
Measures needed include aggressive interest-rate increases, tackling inflation, mending international relations, and IMF rescue as last resort, analysts say
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Turkey’s government faces politically unsavoury measures to pull the country back from the brink of economic collapse amid risks of contagion by European banks and emerging markets.
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Gripped by one of the worst currency routs in emerging market history, Turkey’s economic pain could spread beyond its banking system to import-reliant sectors and heighten the risk of exposure of European lenders, particularly Spanish and Italian ones, to the crisis, analysts said. Taking a cue from countries that suffered currency collapse, Turkey’s options include tighter monetary policy and a rescue package from the International Monetary Fund–both unappealing to policymakers.
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“International investors would like to see the same actions taken in Argentina recently: much higher interest rates, [and] a commitment to address inflation, improve fiscal performance and engage with multi-lateral lenders like the IMF,” Hasnain Malik, equity strategist at Exotix Capital, said.
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The Turkish lira sank to its lowest levels since 2001, roiling global markets on Friday, as tensions flared between Nato allies Turkey and the United States over Ankara’s imprisonment of an American pastor.
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On Friday, US President Donald Trump doubled tariffs on Turkish metal imports. Retorting to Mr Trump’s move, Turkish President Recep Tayyip Erdogan urged the country’s citizens on Saturday to support the lira, to win a “war of independence”.
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“If there are dollars under your pillow, take these out. If there are euros, take these out. Immediately give these to the banks and convert to Turkish lira and by doing this, we fight this war of independence and the future. Because this is the language they understand,” he said.
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