Assessing the threat from Turkish corporate FX debt

The recent sharp fall in the lira doesn’t appear to have led to significant FX debt servicing problems for Turkish companies. But given the rapid expansion of corporate FX debt over the past decade, we certainly wouldn’t rule out the possibility that these liabilities start to sour further down the line. Either way, the rise in firms’ FX debt servicing costs is likely to lead to weaker growth in employment and investment.