Crisis in Turkey: Lessons for South Africa – The Wall Street Journal
DUBLIN — We've talked before about the Rand's unexpected resilience in the face of a crisis in emerging market currencies. But as South Africa ponders a path to growth, the crisis in Turkey holds some important lessons – and some important warnings. According to this article from The Wall Street Journal, the crisis in Turkey has been precipitated by uncontrolled borrowing – in the form of foreign-denominated debt, no less – by government and corporations. What makes this scary is that South Africa has done the same thing. The country is second only to Turkey among emerging markets when it comes to external debt to GDP, and like Turkey, South Africa runs a huge current account deficit and relies on foreign portfolio flows to finance it. In other words, the vulnerabilities that have battered Turkey are present in South Africa. What sets SA apart, however, is that South Africa doesn't have a would-be dictator trying to seize control of all the reins of power in order to build a command economy a la China. And perhaps that, more than anything, is what is protecting SA from the ravages that other emerging markets are facing. – Felicity Duncan
By David Gauthier-Villars
(The Wall Street Journal) ISTANBUL — The Turkish lira's fall has been sudden and sharp. The cause traces back nearly a decade when the country's leader decided to turn Turkey into something resembling China on a smaller scale, a world-class economy under one man's firm control.
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