Turkey increasingly likely to need IMF funds, Blue Bay’s Dowding says

Turkey is more and more likely to require loans from the International Monetary Fund to prop up its economy, according to Mark Dowding, co-head of developed markets at Blue Bay Asset Management in London.

The economic problems of Turkey could hurt the eurozone, though there will be little impact on European banks because Turkish subsidiaries are locally capitalised, Dowding said in comments published on the London-based hedge fund’s website.

A political crisis with the United States over NATO member Turkey’s plans to buy Russian S-400 air defence missile systems may create a snag for Ankara should it apply to the IMF for new lending, he said.

“Emerging markets have performed relatively well over the past month, yet we are concerned that Turkey is set for further weakness, should the delivery of Russian S-400 missile systems lead to U.S. sanctions being imposed in the weeks ahead,” Dowding said.

“This could also impact Turkey’s ability to access IMF assistance, as we believe it is increasingly likely to need to do so in the months to come.”

Turkish President Recep Tayyip Erdoğan has ruled out the option of IMF financing to help right the economy, which entered a recession in the second half of last year. Many investors and economists say the country is now short on the capital needed to help reduce the debt load of the private sector, which has grown after a currency crisis last year.