Investing in emerging markets is like watching the tides without the moon as a guide. Capital flows in and out in surges, and woe to the country that gets caught with bad policies when the tide suddenly goes out. Argentina has been getting that re-education of late, and now Turkey is watching capital flee for safer climes.
Turkey’s lira fell as much as 5% on Wednesday, and it’s lost more than a fifth of its value this year, adding to a long decline that is forcing extreme monetary measures to compensate. Much of the blame…
ISTANBUL — President Recep Tayyip Erdogan of Turkey called early elections for June 24, more a year earlier than scheduled, in part to get ahead of tremors in the economy. But on Wednesday they caught up with him as the country’s currency, the lira, took a steep dive, presenting a potential danger to his re-election campaign.
The lira fell close to five to the dollar on Wednesday, a 20 percent drop this year, according to Reuters, before the Central Bank stepped in to buck it up with a sharp increase in one of its primary lending rates, to 16 percent from 13.5 percent.
The turbulence was not only a sign of growing investor alarm at the state of Turkey’s economy. The drop in the lira has also left some of Turkey’s biggest businesses embattled, while eating deeply into the living standards of ordinary Turks, meaning voters.
In that regard, it could not come at a worse time for Mr. Erdogan, who officially opens an election campaign on Thursday that is expected to emphasize his economic achievements and impressive year-on-year growth over 15 years at the head of government.