The worsening diplomatic rift between the United States and Turkey is creating an alarming situation for Turkey; the Turkish Lira has lost almost 40% of its value during this year, the investors are stalled due to the President Tayyip Erdogan’s influence over monetary policy.
The German Finance Ministry said on Monday, that Turkey’s national currency crisis creates an additional risk for German economy due to the trade frictions with the US as well as the possibility of the United Kingdom leaving the European Union without making a deal.
The German officials said, Turkey has lost almost 40% of its currency’s value in the last one year, hit by the worsening diplomatic rift between the US and Turkey, Germany is the second largest investor in Turkey and EU is the biggest trading partner.
The ministry said in its monthly report, “Risks to German economy are particular to the Brexit, how the UK is going to leave the EU also the future US trade policies. The president debate about tariffs and the threat of trade war are curbing the trade activity as a whole.”
The economic developments in Turkey pose a new “external economic risk” for the country, the statement added.
Despite the risks and challenges, the German economy remains optimistic, the economy is efficiently supported by state spending, low-interest rates, private consumption, rising wages and vigorous labor market, the report said.
The trade war is a serious threat but companies are also expected to increase investments as the global economy remains on a positive track, it added.