Turkish millionaires top exodus list, signalling a major crisis ahead - analysis
In 2017, the largest exodus of millionaires from a nation came out of Turkey at a staggering 12 percent, signalling a looming financial crisis headed for Turkey , writes Ruchir Sharma in an article he penned for the New York Times.
Sharma explains ‘’when a country begins to fall into economic and political difficulty, wealthy people are often the first to ship their money to safer havens abroad. The rich don’t always emigrate along with their money, but when they do, it is an even more telling sign of trouble.’’
The currency of Turkey, which is followed by Venezuela on the millionaire exodus list, fell to a record low against the dollar last month, forcing the central bank to raise interest rates 300 basis points to 16.5 percent in an emergency meeting. The Turkish government was quick to blame outside forces for the lira dive.
Meanwhile, in the United States, the arrival of a billionaire president did not seem to attract or repel millionaires. A net total of 9,000 millionaires migrated to the United States last year, but they represent a drop in the ocean of five million American millionaires, Sharma points out.
No country gains by losing the talent and capital of its wealthiest residents, particularly not emerging countries,the article explains.
Records show that 10 of the last 12 major currency crises, dating back to the Mexican peso meltdown of 1994, began when residents started sending money abroad, which was typically two years before the currency collapsed.
While politicians are quick to blame “evil” and “immoral” foreign speculators for currency crises, it is the locals who see trouble coming ahead of time, he explains.
There is clear evidence of looming financial difficulty in Turkey, Sharma writes.
‘’Starting early last year, affluent Turks began effectively moving large sums of money out of the country by exchanging their lira bank deposits for dollars and euros, while foreigners continued to buy Turkish assets.’’
Turkey’s millionaires appear to be fleeing both deteriorating financial conditions marked by very high inflation, and President Recep Tayyip Erdoğan’s crackdown on his critics particular following the July 15, 2016 coup attempt, including those who happen to be in the world of business.
Meanwhile, the losses for India, Russia and Turkey became gains for havens like Canada and Australia, joined lately by the United Arab Emirates.
Millionaires move money mainly out of self-interest, to find more rewarding or safer haven, Sharma explains.
‘’There aren’t a lot of them, but they can tell us a great deal about what is going wrong — and right — in a country’s economic and political ecosystems.’’