At the starting of the year, a Turkish Lira was worth $0.26. Now, the value has dropped to $0.15, marking a 42% drop, a new record low. This has caused a lot of concern in the Turkish business sphere, root of it being the clash between President Donald Trump and President Tayyip Erdogan.
After Turkey arrested Andrew Brunson on the charges of espionage and links to terrorism, The US government slapped double tariffs against Turkish steel and aluminum. President Erdogan called it a ‘stab in the back’. He said, “You act on one side as a strategic partner, but on the other, you fire bullets into the foot of your strategic partner. We are together in Nato and then you seek to stab your strategic partner in the back.”
The drop has created problems for Turkish companies who have taken loans from US loaners. The amount and the interest are ballooning, making it difficult for the Turkish companies to settle their debts. The tumble has disturbed global markets, especially European Banks who have considerable exposure to Turkey. The collateral damage has affected India, South Africa, and other countries who have investments and business with Turkey. Tokyo stocks and Hong Kong stocks fell by 2% and 1% respectively.
Turkey can expect relief from some of its other friends, but that too may be pricey. Moreover, the transcontinental country has limited options. Earlier, Greece was given a bailout from its economic crises by various European Union (EU) countries and banks. Bur unlike Greece, Turkey is not a member of the EU, hence the country is far from immediate relief.
Turkey may receive help from China and Russia. President Erdogan spoke to Russian President Vladimir Putin last week and discussed stronger ties between the two countries. For now, Turkey will have to manage its economy with radical steps.