Turkey economy heading for another significant correction, BlueBay’s Ash says
Turkey’s economy is probably heading for a correction last seen in 2018, when it was rocked by a currency crisis, according to Tim Ash, chief emerging markets strategist at BlueBay Asset Management in London.
“Another stop” and a repeat of 2018 will likely happen within a year, Ash said in comments to former Turkey bureau chief for Bloomberg, Mark Bentley in his podcast “Front Seat”, published for Ahval.
“It’s very hard to time it… I don’t think we are too far away from another significant correction, it’s more likely to be within the next year, rather than the next three years,” Ash said.
Turkey’s lira is declining sharply again - it has dropped by more than 40 percent since the summer of 2018 - as foreign investors exit the country and the central bank slashes interest rates to help stimulate economic growth. Ash said policy mistakes made before the crisis were being repeated. At the same time, Turks have been selling liras for dollars and euros because returns from lira investments are too depressed due to the low rates, he said.
The lira weakened by 0.3 percent to 6.22 per dollar late on Friday afternoon local time, trading near the lowest levels since the weeks following the currency crisis.
On Syria, Ash said Turkey should be commended for its support for refugees in the embattled province of Idlib, where rebels and ordinary people are coming under fire from the forces of President Bashar Assad, backed by Russia.
NATO needs to do more to support Turkey, which has been the only country in the Western alliance to stand against Assad in Idlib, where hundreds of thousands of people have been forced from their homes, Ash said. Turkey hosts 4 million Syrian refugees, while the West has behaved appallingly, he said.
“We have to give some credit to Turkey for actually defending refugees and obviously Turkey has been providing sanctuary to more than 4 million, while the West has been doing very little,” he said.
At least 34 Turkish soldiers died on Thursday in a bombardment by military forces backing Assad, prompting Turkey to retaliate with rocket attacks, reportedly killing more than 100 Syrian fighters. The clashes have raised concerns for a direct military confrontation between Turkey and Russia, which backs Assad militarily with air power.
NATO should make much clearer statements to Moscow in support of Turkey, Ash said. Members of the alliance should also provide Patriot missiles to Ankara and President Recep Tayyip Erdoğan, in turn, should give up S-400 air defence missiles bought from Russia.
Ash said he is optimistic for democracy in the country in the long term, saying a presidential system of government introduced in 2018 has been “a disaster”. Even supporters of Erdoğan’s ruling party understand that the system has not worked, he said.
He said his optimism was based on rising opposition to Erdoğan from former allies and the performance of alternative political groups in local elections last year, where democracy won out.