Turkey Is Heading for Economic Collapse, Ashmore Says
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President Recep Tayyip Erdogan risks pushing Turkey’s economy into an economic collapse similar to those seen in Latin America under populist regimes, according to Ashmore Group Plc.
While more diversified than Venezuela’s oil-dependent economy, Turkey is currently on a very similar path of policy missteps that are likely to lead to ruin, the $85 billion emerging-market asset manager said.
Capital controls, nationalization and other policies designed to prevent the private sector from protecting its property as the macroeconomic environment deteriorates are the next “logical policy steps” that will follow in Turkey, Jan Dehn, the London-based head of research at Ashmore, said by email. His comments, initially in a research report Tuesday, came after Erdogan rattled markets by dismissing central-bank Governor Murat Cetinkaya early Saturday.
The problem is that U-turning back to good policies has very big upfront political costs,” said Dehn, who caught the bottom of the market on the Russian ruble in December 2014 and turned bullish on emerging markets in October 2015, months before a two-year rally began. “The longer he delays the bigger the cost, which is why politicians who go down the heterodox route rarely change tack and they almost always end in crisis.”
Turkish officials have repeatedly denied any plans to impose capital controls and said they would adhere to free-market principles.
Here is Dehn’s characterization of the decline: