Video COMMENTARY:  Turkish economy facing sudden stop or stagflation

The arrest of CHP Istanbul mayor Ekrem Imamoglu triggered a huge confidence shock, which saw CBRT FX reserves declining by as much as $50 bn.  To avert currency depreciation, Central Bank was forced to raise interest rates. This has, in turn, led to loud backlash from the business community about an insolvency wave.  Turkish economists are debating whether the economy will experience a sudden stop, that is a rapid and significant drop in economic activity.

This video discusses the probability of a sudden stop, arguing  that Erdogan’s actions against main opposition party CHP will be the decisive factor in steering economic activity.  The most likely scenario is not a sudden stop, but stagflation.

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