Turkish crash has already begun, says economist

There has been little room for optimism in recent predictions on Turkey’s economy, but even among pessimistic company, one strategist’s comments on Turkey to Swiss newspaper Neue Zürcher Zeitung came off as bleak.

Turkey has already entered an economic crisis and can expect a “massive” fall in the value of the Turkish lira by the period after the June 24 elections “at the latest,” Turkish daily Cumhuriyet quoted economist Russell Napier as saying.

After years of steady decline, the lira’s fall has accelerated sharply in recent weeks, repeatedly hitting record lows against the dollar and leading losses in emerging markets on Monday.  

Turkey at this stage is no longer able to make payments on its approximately $400 billion debts, said Napier. Italian and French banks will bear the brunt of the crisis that this will trigger, and the European Union will likely be forced to step in to save them.

“A Turkish crash would trigger a global crisis,” Cumhuriyet quoted Napier as saying.

With a crisis looming, Turkish firms such as Doğuş Holdings and Turkish Telecom owner OTAŞ which owe large amounts in foreign currencies are already scrambling to restructure their debts, said Napier.

The economist added that economic difficulties had made capital flight regulations inevitable, and said that a legal amendment last week had granted the cabinet increased authority to pass such regulations.