Crisis looms for emerging markets

Turkey's markets were shaken last week following the arrest of Istanbul mayor Ekrem Imamoglu - the biggest rival to President Recep Tayyip Erdogan.

The stock and bond markets fell for three consecutive days, with the stock market recording its largest weekly drop since the collapse of Lehman Brothers in 2008, while the Turkish lira continued to depreciate.

While Turkey's market woes seem to stem from the political crisis, its current economic woes and persistently high inflation are the primary reasons for the political turmoil.

The political upheaval triggered by Turkey's economic problems may lead to a financial crisis, and could be the tip of the iceberg for emerging markets.

For instance, Indonesia's financial market was rattled last week, with a significant decline in the stock market. Recent data showing weak spending demand, coupled with concerns that President Prabowo Subianto's slew of populist policies would further weaken the economy, prompted international investors to sell Indonesian stocks and assets en masse.

In fact, as global tariff issues continue to escalate, developed countries are also beginning to experience persistent inflationary pressures.

However, because these nations have stronger national power and more favorable fiscal conditions, they have a higher capacity to withstand such pressures.

In contrast, emerging nations are in a different situation, and do not have the strength to fight these challenges.

Therefore, a large-scale financial crisis is inevitable in emerging markets within this year.

Andrew Wong is a veteran independent commentator