Why Turkey’s crisis feels familiar for emerging markets

For nearly 10 years now, the flood of cash from global central banks has financed shopping malls in Istanbul, booming cities in China and 100-year bonds in Argentina. Today, many of the malls are empty, property developers in China are riddled with debt, and Argentina has just submitted to a bailout from the International Monetary Fund. Financial experts worry that the turmoil in Turkey, which for the better part of a year has been contained, will spread, following the path of other emerging market meltdowns like those in Mexico in 1994 and Asia in 1997. “The risk of contagion is pretty high,” said Robert Subbaraman, an emerging market economist at Nomura in Singapore. The crisis in Turkey has been made worse by a diplomatic dispute with the U.S. and the mercurial moods and questionable policy positions of President Recep Tayyip Erdoğan, but the combination of heavy international borrowing and a fall in the national currency is the same scenario that could undermine other emerging economies. According to the Bank for International Settlements, a forum for central banks, the total amount of dollar-based loans has jumped from $5.8 trillion in the first quarter of 2009 to $11.4 trillion today. Of that, $3.7 trillion has gone to emerging markets, more than doubling during that period.NY Times

Source : https://www.thehindu.com/todays-paper/tp-international/why-turkeys-crisis-feels-familiar-for-emerging-markets/article24711078.ece

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