Turkey’s ‘peg-legged’ foreign currency reserves (Al Monitor, July 10, 2020)
The US dollar stockpiles of countries have taken on a new importance amid the global…
Pumped with cheap and abundant credit since early June, Turkey’s economy has warmed up after a pandemic-ravaged second quarter in which it is estimated to have shrunk more than 10%. The revival, however, is fraught with risks, as the fresh slump of the Turkish lira demonstrated this week.
The loan-driven uptick in domestic demand has an array of side effects, including on inflation, which was near 12% in July, and the country’s gaping foreign exchange gap, which had already depleted central bank reserves, when the embattled lira took another nosedive Aug. 6, plunging to record lows. The economic warm-up might well prove a false spring and devolve into a stormy season in October.