The current Turkish economic crisis may be a warning sign of what lies ahead for some Asian economies, wrote journalist Tom Holland in the South China Morning Post on Monday.
Whilst many have been quick to attribute Turkey’s problems to the unorthodox economic outlook and combative stance of its president, Recep Tayyip Erdoğan, Holland said Turkey’s difficulties might be “the result of a broader problem, which just happens to have shown up in Turkey first”.
He said that, “while Turkey may be an extreme case, its economic situation is by no means unique”.
“In the years following the 2008 financial crisis,” he wrote, “Turkey emerged as an investors’ darling. With U.S. interest rates at zero, the Federal Reserve printing money to support America’s ailing economy, and the U.S. dollar weak, Turkey found it easy and cheap to borrow large amounts of U.S. dollars to fund ambitious domestic investment programmes.”
More recently, as the value of the dollar has risen, with the United States having raised short-term rates seven times since 2015, Turkey is finding it increasingly difficult to repay its debts.
This, said Holland, in addition to the recent doubling of oil prices, U.S. President Donald Trump’s economic policies, were what lie at the root of Turkey’s current crisis, which has seen the value of its currency drop by around 40 percent against the dollar since the start of the year.
Many other countries, particularly developing economies in Asia, are in a similar situation to Turkey, Holland said. “According to the Bank for International Settlements, companies in emerging markets around the world have accumulated more than $3 trillion in U.S. dollar debt.” Indonesia, Malaysia, the Philippines and India are countries that “look vulnerable to some extent”.