Analysis: Fallout of Ukraine war exposes Turkey’s vulnerable economy

  • Back-to-back crises after December currency shock
  • Erdogan’s economic plan rested on trade rebalance
  • Energy shock said to ‘strike at the heart’ of plan
  • C/A deficits, inflation seen soaring this year

ISTANBUL, March 10 (Reuters) – President Tayyip Erdogan’s wager that Turkey could ride out an inflation and currency shock with low rates and reserves has all but collapsed, after the fallout from the war in Ukraine left the economy uniquely vulnerable to soaring energy prices.

Turkey’s gas import bill alone is expected to jump to $40 billion this year, twice its estimated cost last year, a government official and two industry consultants told Reuters.

That price tag dwarfs Turkey’s $18 billion in net official foreign reserves, and it is only compounded by oil and grains prices that have spiked as Russia’s invasion of Ukraine entered a third week, bringing sanctions on Moscow and fallout for the global economy.

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