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Reserve Bank will watch Turkey closely in case SA catches its economic flu

Aug 20 2018 20:47
Khulekani Magubane

The SA Reserve Bank will be closely watching economic events unfolding in Turkey given that emerging markets are often classed together by investors, according to the Geneva Management Group. 

The Turkish lira has been falling sharply in recent days as the country faces US sanctions. 

“Emerging market currencies like the rand, the Russian ruble, the Indian rupee, the Brazilian real, while they each have their own dynamic, parameters and inflex points, are generally classed together by asset managers,” said the group's CEO Elzas.

"[...] when Turkey gets the flu, South Africa is at risk of catching it as well,” he said.  

The group, a new report, said that it would "not be misplaced" to fear a ripple effect of the Turkish currency crisis on other emerging markets.

"We shouldn’t be surprised if heads of central banks in countries such as India, South Africa or Brazil are watching the developing situation in Turkey very closely with their own vulnerabilities in mind.'

The Turkish crisis, meanwhile, will be on the forefront of the agenda of the International Monetary Fund, World Bank and European Bank for Reconstruction and Development.

“The past week alone saw it [the lira] lose 25% of its value, priced 0.20 per $1 in 1 week. This on top of the fact in the past year the lira has been the worst performing currency in global markets, ultimately dropping by over half its value in the last 12 months,” the group said.

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rand  |  turkey  |  lira  |  emerging ­markets  |  south africa
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