The Turkish lira has nosedived in value in the past week over concerns about Erdogan’s economic policies and after the United States slapped sanctions on Turkey angered by the continued detention of an American pastor.
The finance expert warned Turkey must encourage investment or risk creating a “very scary picture”, with private companies indebted in euros and dollars set to face hefty repayments due to the lira meltdown.
Ms Vera, who is Bulltick Capital’s Head of Global Research, told Fox News: “What the crux of the issue is in Turkey is the need for foreign capital.
“If you spook investors with a gaping current account deficit of seven percent of GDP, plus the need to finance private companies with foreign currency debt that needs to be repaid in US dollars with the lira dropping 40 percent year-to-date, you’re going to make for a very scary picture.
She added: “Over the longer term I think Turkey faces some serious pressure with regard to their debt profile.
“I mean, 40 percent of GDP in the private sector is indebted in US dollars or euros. That’s a tremendous amount.”
In order to save it’s economy, Ms Vera urged Turkey to start increasing interest rates to “at least 1,000 basis points”.
She said: “They need to increase credibility. There is a huge hit on credibility with nepotism at the highest ranks and with a real collapse in any confidence with the Erdogan regime.
“They need to engage in structural reforms.
“They need to revamp the debt structure and they need to really come out and be forceful with regard to central bank independence.”
Turkish President Recep Tayyip Erdogan told supporters on Monday that the lira’s free-fall was the result of a plot as he urged residents to exchange dollars and gold for lira – calling on the nation to stand united against America.
Mr Erdogan said: “What is the reason for all this storm in a teacup? There is no economic reason. This is called carrying out an operation against Turkey.”
The currency dropped after US President Donald Trump doubled import duties on steel and aluminium as part of fresh sanctions on the country.
The US Government sanctioned Turkey’s justice and interior ministers last week after Turkey refused to release American pastor Andrew Brunson.
Turkey says that the pastor is linked to the banned Kurdistan Workers Party, which Turkey blames for a failed coup in 2016.
In response, President Trump doubled tariffs on aluminium and steel imports from Turkey, deepening the currency’s losses and raising concerns that the crisis could weigh on other economies.
The currency has lost 20 per cent of its value against the dollar and fallen more than 40 per cent this year amid tension over Mr Erdogan’s control over the economy and deteriorating relations with the US.
A Turkish presidential spokesman has insisted the country’s economy is strong and said nobody should pay attention to “speculation”.
Source : EXPRESS