Turkey Economic Monitor, December 2018 : Steadying the Ship
Mid-2018 was a period of intense market volatility and rising economic stress in Turkey that was precipitated by existing macroeconomic imbalances and elevated political tensions with the United Staes. A confluence of burgeoning domestic economic i...
| Main Author: | |
|---|---|
| Format: | Report |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/566931547042740293/Turkey-Economic-Monitor-Steadying-the-Ship http://hdl.handle.net/10986/31129 |
| Summary: | Mid-2018 was a period of intense market
volatility and rising economic stress in Turkey that
was precipitated by existing macroeconomic imbalances and
elevated political tensions with the United Staes. A confluence of
burgeoning domestic economic imbalances and a more
challenging external environmentled to a dent in investor
confidence in Turkish assets and a sharp slowdown in capital
flows to Turkey in 2018 Q2-Q3. Though this did not
technically amount to a sudden stop, Turkey was particularly
badly affected by a general move away from emerging markets
(EMDE) due to its accumulated macro imbalances (high current
account deficit, high inflation, overheating economy) and
perceived policy weaknesses. Market volatility in Turkey has
subsided since the turbulence in August, but the economic
situation remains fragile. Turkey’s large external exposure
leaves it vulnerable to further market jitters and external
monetary tightening. The external shock in the summer of
2018 also translated into significant real sector impacts,
including a sharp acceleration in inflation from already
elevated levels. The gap between consumer and producer price
inflation widened significantly since July, reflecting
suppliers’ inability to pass on priceincreases to consumers
due to declining demand. High production costs together with
slowing demand have prompted supply side adjustments. |
|---|