Turkish economic woes linked to falling global liquidity
Recent dangers to the Turkish economy have emerged due to global changes, and the ruling Justice and Development Party (AKP) have to adapt their economic messaging to the surrounding context if Turkey is to avoid a crisis, Turkey expert Andrew Finkel wrote for Outriders.
A recent dramatic drop in the lira came when President Recep Tayyip Erdoğan indicated he would try to spend his way out of Turkey’s economic problems at a time when borrowing is becoming ever-more expensive.
“This made no sense. Turkey needs to borrow from abroad to tick over. Its current account deficit ($40-50 bn.) is high among its peers, and it needs to turn over an additional $185 bn. in short term debt,” Finkel said.
“In times of confidence or when there is high global liquidity, debt is not a problem. But these are not those times. A falling exchange rate or more costly borrowing are equally bad news.”
However, Finkel said, the Turkish electorate had not yet realised what was happening.
“And history’s lesson, however banal, may be that nations which slide down the slippery path towards autocracy don’t really suffer,” he said.
“Until they do.”