Turkey Currency Collapse! Lira Plummets After Turkish Central Bank Deputy Governor Quits

Turkey's currency has come under pressure amid concern over its banking sector, President Tayyip Erdogan's non-market-friendly policies and worsening diplomatic ties with the US. The country is particularly vulnerable because of its high level of external debt. Its total debt-to-GDP is below the emerging market average, but Ankara is heavily dependent on foreign capital with 70 percent of its debt denominated in dollars and euros, compared to a 35 percent average for emerging markets. Most lending to Turkey is from European banks, with the most exposed being Spain's BBVA, Italy's UniCredit, France's BNP Paribas and Holland's ING. Spanish banks' exposure to Turkish debt is equivalent to about 6 percent of Spanish GDP, while the exposure of Italian and French banks is limited and that of Britain and the US negligible. Its current account deficit is almost at 6 percent of GDP and is one of the largest amongst emerging market countries. This makes it vulnerable to a shock if foreign investors pull out.









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