David P. Goldman: Turkeys financial position is one of the worlds great financial mysteries, in fact, a uniquely opaque puzzle: the country has by far the biggest foreign financing requirement relative to GDP among all the worlds large economies, yet the sources of its financing are impossible to trace. I have analyzed sovereign debt risk for three decades - including stints as head of credit strategy at Credit Suisse and head of debt research at Bank of America - and have never seen anything quite like this. At around 8% of GDP, Turkeys current account deficit is a standout among emerging markets. It is at the level of Greece before its near-bankruptcy in 2011. Where is the money coming from to cover it? ...Despite the largesse of the Gulf States, Turkey is locked into a vicious cycle of currency depreciation, higher interest rates, and declining economic activity. Turkish voters stood by Erdoğan in last Marchs national elections, believing that he was the politician most likely to deliver jobs and growth. But his ability to do so is slipping. If the Turkish lira drops sharply, the cost of debt service to Turkish companies will become prohibitive, while the cost of imports and ensuing inflation will depress Turkish incomes. By some measures Turkey already is in a recession, and it is at risk of economic free-fall. meforum.org/4828/erdogan-flying-carpet-unravels
Posted on: Wed, 24 Sep 2014 13:17:01 +0000