Turkey “heading for economic meltdown” – analyst
Turkish President Recep Tayyip Erdoğan has put his inexperienced son-in-law in charge of the economy and is focusing on the extreme short term, damaging the fundamentals of Turkey’s economy and leading it towards economic disaster, Fadi Hakura, a Turkey expert for London-based think-tank Chatham House, wrote for Time magazine.
Erdoğan, Hakura wrote, was flooding the markets with cheap credit and sponsoring rampant megaprojects in order to artificially boost growth, but this turbo-charged growth would eventually burn out the engine of the economy.
“He does not seem to appreciate that Turkey’s growth model requires an overhaul to join the league of rich economies. It is too reliant on consumer spending and government-sponsored infrastructure and construction projects funded by speculative financial flows rather than on sustained private investment and exports,” Hakura said.
“Net result: the corporate sector’s foreign-exchange liabilities have climbed to a record $328 billion as of the end of 2017. When netted against foreign-exchange assets, it is still a worrying $214 billion. Its U.S. dollar and euro debt pile has more than doubled since 2008, 80 per cent of which is held by domestic banks. Given these acute balance-of-payments conditions, it is not farfetched that Turkey may impose capital controls in the short-to-medium term to restrict the outflow of foreign assets. At $50 billion, the current account deficit—defined as the sum of the trade balance and financial flows—is not even covered by the central bank’s net international reserves at nearly $45 billion.”