Turkey's Next Crisis?

Emerging Europe Economics Focus

Turkey’s election: a fork in the road for the economy

Voters in Turkey head to the polls in 2023 and if the ruling People’s Alliance and President Erdogan cling on to power, the authorities are likely to double down on their “new economic model”, raising...

Emerging Europe Economics Update

“Lira-isation” policies are no cure for Turkey’s problems

Policymakers in Turkey have doubled down on their new economic model of “lira-isation” by pursuing more extreme de-dollarisation policies in recent months. These appear to be having an impact in terms...

Emerging Europe Economics Update

Key questions on capital controls in Turkey

The recent falls in the Turkish lira have led to increased speculation that, with the CBRT showing no sign of willingness to raise interest rates, policymakers will be forced to turn to capital...

Emerging Europe Economics Update

Turkey: how will officials respond to falls in the lira?

The Turkish lira has come under renewed pressure in recent weeks but interest rate hikes to shore up the currency are off the cards. Instead, further sharp and disorderly falls would most likely be...

Emerging Europe Economics Update

Turkey’s current account deficit is a growing risk

Spillovers from the war in Ukraine are likely to cause Turkey’s current account deficit to widen to more than 4% of GDP this year. In the recent past, deficits of this scale have tended to precede...

Emerging Europe Economics Focus

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...

Emerging Europe Economics Update

Turkey: how strong is the fiscal picture?

Turkey’s public finances have become more vulnerable to falls in the currency in recent years, although we think the likelihood of sovereign default is very low. Perhaps the bigger risk for the public...

Emerging Europe Economics Update

Turkey: five key questions (and answers)

This Update answers some of the most common questions that we have received from clients during Turkey’s recent turmoil. In short, the economic fallout doesn’t look like it will be as bad as it was...

Emerging Europe Economics Update

Turkey & the macro fallout from past “sudden stops”

The history books show that currency crises in other parts of the emerging world in recent decades have resulted in peak-to-trough falls in GDP of around 8% on average and pushed headline inflation up...

Emerging Europe Economics Update

Turkey & policy responses during past “sudden stops”

The Turkish lira’s sharp fall yesterday looks similar to the experience of sudden stops elsewhere. In those instances, central banks usually responded with interest rate hikes of around 600bp as well...

Emerging Europe Economics Focus

Turkey and the rising risk of (another) currency crisis

The huge hit to Turkey’s balance of payments position from the coronavirus crisis and the evaporation of investors’ confidence in policymakers makes the risk of a currency crisis like that seen in...

Emerging Europe Economics Update

Will Turkey turn to the IMF?

The damage to Turkey’s economy from the coronavirus outbreak has led to suggestions that the government may turn to the IMF for a financing package, but the political backdrop means that this would...

Emerging Europe Economics Focus

Turkey: what next?

The plunge in the Turkish lira is likely to push inflation above 20% and tip the economy into recession in the coming months. Our base case is that GDP growth will now average 3.0% over 2018 as a...

Emerging Europe Economics Focus

Turkey’s elections: what’s at stake?

This weekend’s elections in Turkey, which will mark a shift to a presidential political system, have put markets on edge amid fears of a further tilt towards unorthodox policy under a (strengthened)...

Emerging Europe Economics Focus

An anatomy of Turkey’s credit boom

In this Focus, we highlight the scale of Turkey’s credit boom and warn that the build-up of vulnerabilities in the banking sector is more of a concern than most acknowledge.

Emerging Europe Economics Focus

The consequences of Turkey’s inflation problem

There is mounting evidence that the Turkish central bank’s pursuit of loose monetary policy has caused inflation expectations to become unanchored, risking an upward wage-price spiral. As we explain...

Emerging Europe Chart Book

Global bank turmoil another headwind to Em Europe

The turmoil in the global banking sector has not spread to Emerging Europe, but the focus is back on the health of the region’s banks given the not-so-distant memory of the 2008/09 banking crises that...

Emerging Europe Economics Rapid Response

Turkey Interest Rate Announcement (Mar.)

Emerging Europe Economics Update

Turkey’s banks in better shape, but external risks still high

Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and...

Emerging Markets Economics Update

EM banks: revisiting credit risks

Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from...

Emerging Europe Data Response

Poland Activity Data (Feb.)

February’s activity data out of Poland paint a weak picture and support our view that GDP will, at best, flatline over 2023 as a whole. Even so, the central bank has little scope to help and we expect...

Emerging Markets Economics Update

Emerging Markets Capital Flows Monitor

EMs, in general, don’t appear to have suffered large capital outflows over the past 10 days or so amid the turmoil in the global banking sector. But some countries with large current account deficits...

Emerging Europe Economics Weekly

SVB, Credit Suisse & the potential implications for EE

Economies in Emerging Europe (EE) are particularly vulnerable to a sharp weakening of capital inflows if concerns about the health of the global banking system were to escalate. Investors revised down...

Emerging Europe Rapid Response

Russia Interest Rate Announcement (Mar. 23)

Emerging Europe Data Response

Turkey Activity Data (Jan.)

The large increases in industrial production and retail sales in Turkey in January suggest that the economy got off to a strong start in early 2023. Activity will have been disrupted from the...

Emerging Europe Data Response

Russia Consumer Prices (Feb.)

Russian inflation came in slightly softer than expected in February, at 11.0% y/y, and it will fall to the central bank’s 4% target in March as base effects pass through. We don’t think there’s been...

Emerging Europe Economics Weekly

Hawkish DM central banks may delay rate cuts in CEE

The growing expectation that interest rates in developed markets will rise further and stay higher for longer than previously anticipated isn’t prompting us to abandon our view that central banks in...

Emerging Europe Economics Update

Poland: rates on hold, but scope for cuts this year

The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave...

Emerging Europe Economics Rapid Response

Poland Interest Rate Announcement (Mar.)

Emerging Europe Economics Update

Czech growth to disappoint as eurozone recession hits

The very high household saving rate in Czechia and the sharp fall in inflation we expect there this year means there is scope for consumer spending to recover over the coming quarters. But we think...

Emerging Markets Economics Update

EM slowdowns and NPLs: lessons from the past

Non-performing loan (NPL) ratios have risen by as much as 4-5%-pts during non-banking crisis downturns in EMs in the past. This time around, there are reasons to think that the increase will be...

Emerging Europe Economics Weekly

Czech koruna strength, gloomy GDP breakdowns

The recent strength of the Czech koruna, which hit a 14-year high this week, adds to a number of disinflationary forces that are currently taking hold in the country. And despite hawkish noises from...