Poll: Which Emerging Market Is Facing the Most Difficult Economic Challenges?
Many expect that 2014 will be a challenging year for emerging markets. But which emerging market is currently facing the most difficult challenges? In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers which of six prominent emerging markets has the toughest road ahead.
Which of the following emerging markets is facing the most difficult economic challenges?
Nearly a third of 847 respondents chose Turkey. A nation of about 80 million, the world’s 17th largest economy, and an EU (European Union) candidate country since 1999, Turkey is seeing its currency and stocks sliding since 2013 amid increasing talk about U.S. Federal Reserve plans to trim its monthly bond-buying program. After sliding 17% in 2013, the Turkish lira hit its all-time low against the U.S. dollar toward the end of January 2014, and as of Feb. 5, on a 52-week basis, the stock market index Borsa Istanbul 100 is down about 20%.
Although rapid outflows of hot money are a problem for emerging markets at large, anti-government protests last summer and a major corruption scandal toward the end of 2013 have hit the economy hard. Turkey’s central bank has dramatically increased its policy rate, but the lira remains shaky. Turkey’s current problems are arguably more related to governance and politics than to economics. Investors will perhaps be analyzing Turkey’s local elections at the end of March 2014 and its presidential elections in August 2014 to judge if the ruling party will be able to retain a majority in the national elections in June 2015 and if the political storm facing Turkey’s economy will calm down.
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