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As Trump stumbles, Turkish economy comes back from brink of crisis

US President Donald Trump's underperformance on his pledges has led global funds to return to emerging economies, which helped Turkey to escape an economic crisis, though not without a growing baggage of problems.
Turkey's President Recep Tayyip Erdogan (L) meets with U.S President Donald Trump in the Oval Office of the White House in Washington, U.S. May 16, 2017. REUTERS/Kevin Lamarque - RTX363HP
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US President Donald Trump's underperformance on his pledges has directed global funds back to emerging economies, including Turkey. Propped up by the inflow of foreign capital, the Turkish economy has begun to pull itself together, returning from the brink of the crisis that occurred in the second half of 2016 when its growth rate had dropped to 1%. The Justice and Development Party (AKP) government looks set to close the year with a growth rate of 3.5% to 4%, notwithstanding the many problems accumulated in the meantime, including the budget deficit, bad loan risks, a growing current account deficit, ossifying unemployment and double-digit inflation.

The dimming prospect of Trump following through on promised reforms such as tax cuts and infrastructure investments has brought about the prospect of slower rate hikes by the Federal Reserve, which — coupled with ongoing liquidity expansions by the European and Japanese central banks — means the return of the period of abundant and cheap money. As the flow of global funds to emerging economies intensifies, local currencies are gaining ground against the dollar and interest rates are on a downward track.

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