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Tuesday, August 14, 2018

Erdogan's Foolish Ego, Incompetence Destroys Turkish Economy, Brader Anwar Can Be "I Am IMF-Expert Adviser".

MY CONCLUSION :  From this very unfortunate Turkish experience, here is some advice for Prime Minister YAB Tun Dr Mahathir Mohamed, our Finance Minister YB Lim Guan Eng and our Economy Minister YB Azmin Ali - 

NEVER EVER ALLOW THE GOVERNMENT OR THE PRIVATE SECTOR TO BORROW MONEY IN ANY FOREIGN CURRENCY LIKE USD, JAPANESE YEN,  EURO, SWISS FRANC ETC.  NEVER.

If you have to borrow, then borrow ONLY in Ringgit.


Having said that here is some news (compilation) about Turkey's economic disaster.  

The economic disaster that Turkey is facing did not happen overnite. 
Neither is it because of Donald Trump coming into power.

Yes Donald Trump has increased import duties on Turkish steel and aluminium. But steel and aluminium make up only a small portion of the Turkish manufacturing economy. And then Turkish exports of steel and aluminium to the USA is an even smaller portion of their economy.   



The Turkish economic disaster has been simmering and now boiling ever since Recip Tayyip Erdogan came into power in Turkey. You cannot destroy a large economy like Turkey in one week or one month. It takes years to build a false economy that ultimately has to come crashing down. This is what is happening in Turkey. 





As you can see in the chart above the Turkish lira has been "collapsing" since before 2014.  The lira was a whopping 1.50 to the mighty US Dollar circa 2014. Latest the lira has even hit 8.0 to the US Dollar. Trump took office in January 2017. 

For almost a decade now, Erdogan has been encouraging using FOREIGN CURRENCY loans to finance a huge construction sector.

There are now huge UNSOLD housing projects in Turkey :




Erdogan has also undertaken HUGE and GRANDIOSE infrastructure works (like mega bridges) with long gestation returns or which cannot generate enough economic returns.  


  • growth led by fiscal, monetary stimulus to construction industry
  • resulting in huge backlog of unsold new houses
  • unprofitable grand projects like Yavuz Sultan Selim Bridge






What went wrong for Turkey? 
economy 'in the midst of a perfect storm'

Turkey one of fastest-growing economies in the world


2nd quarter 2018,  7.22% GDP growth 
but impressive growth fueled by foreign-currency borrowings

huge foreign currency borrowing caused fiscal and current account deficit

OSTB :

  • FISCAL DEFICIT MAKSUDNYA PERBELANJAAN KERAJAAN MELEBIHI PENDAPATAN KERAJAAN. 

  • CURRENT ACCOUNT DEFICIT MAKSUDNYA IMPOT NEGARA MELEBIHI EKSPOT NEGARA



Turkey doesn't have enough reserves to rescue economy
foreign currency reserves just US$85 billion
inflation > 3 times central bank's target


"overheating" inflation — 16% in July 2018 
exceeding central bank's target of 5% 
massive increase in consumer prices

Turkish banks, companies racking up US$ debt 
US$ borrowing fueled consumption and spending
resulted in fiscal and current account deficits

foreign currency debt now > 50% of GDP, according to IMF
US$181 billion debt due in next 12 months 


  • Erdogan influence over central bank undermined investor confidence
  • Erdogan continues to prioritize growth 
  • He is here to stay, markets no confidence in him
  • Erdoğan likes high-rises, gargantuan infrastructure, elevated growth rates
  • too reliant on consumer spending, govt-sponsored infra project
  • funded by speculative financial flows rather than private investment, exports

longstanding characteristic of Turkey's economy is low savings rate

  • Since Erdoğan, Turkey running huge current account deficits
  • US$33.1b in 2016 and $47.3b in 2017
  • US$7.1b in January 2018 
  • rolling 12-month deficit rising to US$51.6b 
  • one of largest current account deficits in the world


banks and big firms borrowing heavily, in foreign currencies.
Turkey must find US$200b / yr to fund current account deficit, maturing debt

economic policy underlying disaster micro-managed by Erdoğan since 2008 
and more strongly since 2013
focus on construction industry, state contracts 
neglecting education, R & D

2017 corporate foreign-currency debt doubled since 2009, up to $214 billion 
external debt, public and private, $453.2 billion end 2017



  • So can Brader Anwar extend his 'lets-borrow-from-the-IMF' expertise to Erdogan? 
  • Because Brader Anwar hardly understands anything about economy, business or finance.


There is a danger from this Turkish economic crisis. 
There can be a spillover on Malaysia as well.  

Sometimes it is all about investor confidence.


My humble advice is DONT PICK ANY FIGHTS with Donald Trump. 


Trump is good for business. The US economy is soaring, their Stock Markets are soaring, the US Dollar is definitely soaring like an eagle (at least against the lira, the Iranian riyal and even against our Ringgit.)

The Mexican border wall / fence / barrier was begun in 1994 by President Clinton.  

Then  under President George W Bush : "On September 29, 2006, by a vote of 80–19 the U.S. Senate confirmed H.R. 6061 authorizing, and partially funding the "possible" construction of 700 miles (1,125 km) of physical fence/barriers along the border."

It is not even an original Trump idea. 

So soon after Trump the Korean Peninsula is at peace. Another high level summit between North and South Korea is in the works, very soon. Things look good in our part of the world.

The Middle East, Turkey, Iran, Saudi Arabia are permanently malfunctioning jock-straps. (You can Google it, but 18+  only ok.) 

Trump has very publicly offered to meet the Iranian president, with no pre-conditions attached. The Iranians have turned him down.   The problems in Iran have nothing to do with Trump or the US. Iran is on its way down. 

Lets us mind our own business.  

But Brader Anwar can go to Turkey and  help his good friend the Dictator Erdogan fix the Turkish economy.  Dapat pahala bro.

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