China's economic troubles a bigger worry for the world than lira woes

The fate of the world economy depends on how China negotiates a weakening currency and capital flight.

Falling back on a standard excuse of besieged strongmen, President Recep Tayyip Erdogan of Turkey is blaming traitors and outside powers for his nation's financial crisis, and describing the strong United States dollar as among "the bullets, cannonballs and missiles" foreigners are using to wage "economic war" on his country.

Many emerging markets make themselves vulnerable to financial crisis by spending more than they can afford, and relying on foreign lenders to fund these profligate habits, but Turkey was an extreme case even before Mr Erdogan took power in 2002. Of late, his reckless economic policies - including setting interest rates at artificially low levels, and driving up debts, deficits and inflation - have only made matters worse. Many wealthy Turks saw another crisis coming and were fleeing the country well before foreigners joined the recent rush, accelerating the fall of the Turkish lira over the past few days.

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A version of this article appeared in the print edition of The Straits Times on August 17, 2018, with the headline 'China's economic troubles a bigger worry for the world than lira woes'. Print Edition | Subscribe