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Turkey’s “new economic model” to amplify old problems

The “new economic model” adopted by Turkey’s government is likely to mean low real interest rates and a persistently weak lira, but it will come alongside a shift towards capital controls, ever higher inflation and growing fiscal and banking sector risks. Drop-In: Jason will be discussing Turkey's mounting economic risks in a 20-minute online session on Thursday at 09:00 ET/14:00 GMT. Register here.
Jason Tuvey Senior Emerging Markets Economist
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First thoughts on Turkey’s FX-indexed deposit scheme

A new scheme announced by Turkey’s President Erdogan last night, which compensates holders of lira deposits for exchange rates losses, has triggered a sharp rally in the lira and will help to mitigate some of the risks that had started to crystalise in the banking sector. But the policy pushes exchange rate risks to the public finances – up till now a point of strength in the economy.

21 December 2021
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