The Turkish lira lost 65.0% against the dollar since the beginning of 2013, and there is no end in sight as the Turkish economy has entered into a downward spiral.
The Turkish economy runs on credits and debts, and millions cannot pay their debt and credit card debts. Also, the total foreign debt of corporations and government is around $405 billion. As the dollar or euro rises against the Turkish lira paying the debt becomes more expensive. A corporation has to earn a greater net profit in Turkish lira, and then pay the loan it borrowed at $2.30 with $2.90. That is one reason why thousands of companies are shutting down. The result is more unemployment and less tax base for the government. The government of Turkey has imposed across the board tax/fee increase of about 8% in January 2016, which should further exasperate the economic problems as less cash flow tends to cause a decline in an economy.
Recently Standard & Poor’s and Moody’s gave a negative rating for Turkey, adding further reasons to increase the interest rates, which reduced the number of people who can qualify to buy a new home. One of the leading economic engines for Turkey has been the building sector.
As the outlook for Turkey becomes more negative there is a net outflow of cash from Turkey. According to IMF, Turkey was in the no. 2 spot behind China for risk threats of increasing company debts.
Add a Comment
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.