World Economy

Turkey Wall Street in Panic Mode

Turkey Wall Street in Panic ModeTurkey Wall Street in Panic Mode

Citigroup announced that it would pull up and leave Turkey’s second largest bank, selling its almost 10% stake in Akbank TAS at an $800 million loss.

That says something about how quickly the bank wanted to leave. It had held the investment for 7 years, Business Insider reported.

“It has been a rough year or two for Turkey’s financial sector,” Dr. Jonathan Schanzer, vice president of research at the Foundation for Defense of Democracies and a former counterterrorism analyst for the US Treasury Department, told Business Insider in an email. “This explains why Prime Minister Ahmet Davutoglu made a surprise visit to New York. He was trying to placate nervous bankers and investors. He didn’t even tell the State Department he was coming. The Turks appear to be in panic mode.”

Deltec International Group, an investment firm, now considers Turkey one of the emerging economies most at risk because of its high current account deficit, low foreign exchange reserves, short term external debt, and weak domestic demand.

That means it’s filing Turkey in the same catastrophe cabinet as Russia and Venezuela. From the start of 2015, the Turkish lira is down over 10% and slid to a fresh record low this week.

“The fact that Citi wanted to sell earlier than planned could be a bad indication for the markets,” Cagdas Dogan of BGC Partners told Bloomberg. “It sort of implies that they expect them to keep on falling.” A large part of the problem with Turkey is its politics.

Economy Minister Nihat Zeybekci blamed the Central Bank for the lira’s woes, saying that it had not raised interest rates enough.