TURKEY FINANCIAL CRISIS 2018 - THE THREAT POSES TO THE WORLD
WHAT HAPPENED? WHY TURKEY IS IN NEWS?
Capital of Turkey : Ankara
Currency of Turkey: Turkish Lira
President of Turkey: Recep Tayyip Erdoğan
'LIRA' is in news because it's losing its value very rapidly. And this is the reason of Financial Crisis arises in Turkey economy.
REASON BEHIND THIS - SOME BASICS FACTORS
Financial contagion refers to "the spread of market disturbances – mostly on the downside – from one country to the other. i.e. Near By regions are also impacted.
Current account deficit and foreign-currency debt
Turkey has been running huge and growing current account deficits :
$33.1 billion in 2016
$47.3 billion in 2017
and Now $51.6 billion - one of the largest current account deficits in the world.
Though Turkey is very beautiful country but all these development not done by it's own money. But from the foreign capital taken from external.
From Borrowed Capital - They become developed.
The economy has relied on capital inflows to fund private-sector excess, with Turkey’s banks and big firms borrowing heavily, often in foreign currencies.
THE PROBLEM
As Turkey currency lose it's value very rapidly. So It's very difficult to return this borrowed money. Because as they lose its value - Hence when they repay the money they need to give more.(As they repay in their currency - Not in Lira )
Currently Turkey has Foreign Reserve of just $85 billion.
In 2005 1 Lira = 1.344 Dollar
In 2018 1 Lira = 7.019 Dollar
i.e. approx 7 times Lira Currency falls. ( Though, It's very strong in terms of Indian Currency)
LIRA is one of the most traded currency - Hence, it's impacting other currency including the Indian Rupee. See Below Chat.
And This is the reason, recently Indian Rupee cross the mark of 70.
WORRIES
And it's assume the value of basic commodities increases (like bread, butter increases) and will be more difficult for a common man to purchase.Capital of Turkey : Ankara
Currency of Turkey: Turkish Lira
President of Turkey: Recep Tayyip Erdoğan
'LIRA' is in news because it's losing its value very rapidly. And this is the reason of Financial Crisis arises in Turkey economy.
REASON BEHIND THIS - SOME BASICS FACTORS
- More Debt taken
- Govt intervene is more in Central Bank.
- Improper functioning of Banks.
Financial contagion refers to "the spread of market disturbances – mostly on the downside – from one country to the other. i.e. Near By regions are also impacted.
Current account deficit and foreign-currency debt
Turkey has been running huge and growing current account deficits :
$33.1 billion in 2016
$47.3 billion in 2017
and Now $51.6 billion - one of the largest current account deficits in the world.
Though Turkey is very beautiful country but all these development not done by it's own money. But from the foreign capital taken from external.
From Borrowed Capital - They become developed.
The economy has relied on capital inflows to fund private-sector excess, with Turkey’s banks and big firms borrowing heavily, often in foreign currencies.
THE PROBLEM
As Turkey currency lose it's value very rapidly. So It's very difficult to return this borrowed money. Because as they lose its value - Hence when they repay the money they need to give more.(As they repay in their currency - Not in Lira )
Currently Turkey has Foreign Reserve of just $85 billion.
In 2005 1 Lira = 1.344 Dollar
In 2018 1 Lira = 7.019 Dollar
i.e. approx 7 times Lira Currency falls. ( Though, It's very strong in terms of Indian Currency)
LIRA is one of the most traded currency - Hence, it's impacting other currency including the Indian Rupee. See Below Chat.
And This is the reason, recently Indian Rupee cross the mark of 70.
WORRIES
- Stock Market has fallen almost 17-18 %
- Government borrowing costs rises to 18% a year
- Inflation in Turkey rises has hit 15%
ANOTHER REASON - BAD RELATION OF TURKEY WITH US
In 2016, Turkey arrested the American Pastor (Minister in charge) named - 'Andrew Craig Brunson' who has been held for nearly two years over alleged links to political group.
US requested to release him. But Turkey denied to release him. Thus, US puts sanctions on Turkey Ministers.
Recently - Turkish courts reject US pastor's (Andrew Craig Brunson) appeal.
Currently Diplomatic Ties between both nations are very bad.
Along with this, we know US has put Extra Tariff (on Steel and Aluminum) across all over world. But for Turkey, US has double the Tariff only for Turkey.
TURKEY also going to purchase S400 from Russia, But US has put sanctions on Turkey US has remove sanctions only from 3 countries India, Indonesia and Vietnam. But From Turkey He has not remove sanctions. So If Turkey Purchase S-400 from Russia, May be in Future US can put more high sanctions on Turkey.
SHIFTING ALLEGIANCES?
Though, Turkey is a member of NATO. But In his recent speech Erdogan, repeated his accusation that the imposition of further tariffs by US and warned that US stance could see a geopolitical shift in the NATO member's alliance.
ONLY GOOD FOR TOURISTS
Good Aspects for Tourists as Lira value plunges - So for Tourists it's a short term benefit
For more information, you can access below links:
https://www.businesstoday.in/markets/global-markets/rupee-falls-lifetime-low-dollar-financial-crisis-turkey/story/281258.html
https://www.thetimes.co.uk/article/turkish-judges-reject-plea-to-release-us-pastor-andrew-brunson-as-trade-row-deepens-tx5nz8gns
https://money.cnn.com/2018/08/14/investing/turkey-lira-emerging-market-crisis/index.html
https://www.livemint.com/Money/o87YZOCnOF2Abk3CIfVzfL/Turkey-crisis-falling-rupee-complicate-RBIs-job-despite-a.html
Above Information is as per as per data available in news till the date when I am posting this.
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For Other Topics visit - http://learn2ogether.blogspot.com/
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