AFP, Paris :
The crisis hitting emerging economies is inflicting the most damage in countries already under severe political pressure at home.
With many emerging currencies falling heavily, central banks are raising interest rates in defence but putting much-needed growth at risk.
This spectre of sharp economic downturn piles even more pressure on embattled leaders such as Turkey’s Prime Minister Recep Tayyip Erdogan or Ukraine’s President Viktor Yanukovych who face deep problems on the political as well as economic fronts.
TURKEY:
Hit by a far-reaching corruption scandal, the Erdogan government and the AKP party have seen their once unquestionable popularity threatened.
The scandal arises from a bitter feud with exiled cleric Fethullah Gulen, with Erdogan accusing his onetime ally of acting as a “state within a state” and stoking controversy to destabilise his government ahead of March local polls.
Amid the turmoil, the central bank doubled a key interest rate this week despite the vigorous disapproval of the government which is afraid that higher rates will slow the economy further.
The success, or demise, of the AKP in the March elections will determine whether Erdogan runs for president in August.
Erdogan, the dominant face of Turkish politics for the past decade, has based much of his success on a booming economy. He reaches a term-limit as prime minster at then end of his current mandate.
UKRAINE:
The country has been embroiled in a violent political crisis ever since President Yanukovych chose closer ties with Russia over a long-expected pact with the European Union.
After months of protests by pro-Western Ukrainians, Prime Minister Mykola Azarov resigned this week in failed bid to defuse the crisis.
Throughout the troubles, the local hryvnia currency has plummeted in value, but economists believe the devaluation could eventually help restart the local economy.
But if the crisis were to linger, the Ukrainian population as a whole could ditch the local currency in favour of a safer foreign one, bringing catastrophic consequences to the already teetering Ukrainian economy.
The collapse of the ruble is always a shock to Russians who have seen several currency crises since the demise of the Soviet Union.
But the latest unwinding of the local currency has not yet affected the high popularity of President Vladimir Putin.
Analysts say a cheap ruble will have a beneficial effect on exports, with the government enjoying a short-term boost to revenues.
“The downside is that the population will undoubtedly feel the effects of higher inflation as time goes on,” said Nikolai Petrov, a Moscow economist.
INDIA:
India’s unpopular left-leaning coalition government run by the Congress party faces national elections before the end of May.
Its economic record will be a key factor in its likely defeat, according to polls, with voter anger focused on rising food prices and low jobs growth.
Economic turbulence last year, which led the rupee to hit a historic low in August 2013, did lead to new criticism of Prime Minister Manmohan Singh but the rupee has been largely spared the severe pressure seen elsewhere in emerging markets in 2014. It has declined by just one percent since January 1.
HUNGARY:
The opposition in Hungary has tried to use the weak forint as a weapon against Prime Minister Viktor Orban’s government and what they see as its poor economic policies.
The weak currency is especially hard for hundreds of thousands of indebted Hungarians who took out mortgages in foreign currencies, primarily Swiss francs prior to 2008, and has also led to higher fuel prices. If the Hungarian Central Bank (MNB), which cut its key rate throughout last year and again 10 days ago, does not change direction, the forint is expected to remain weak, further damaging the popularity of Orban’s governing right-wing Fidesz party.
On the other hand, the weaker forint helps exports, a key driver behind Hungary’s recent return to economic growth after a year-long recession, something that Orban can use ahead of general elections on April 6.
For now, the weak forint has not had an impact on internal politics. The currency has been relatively weak since Orban came to power in 2010, and people are used to the forint fluctuating at around 300 against the euro.
Thailand’s three-month political crisis has seen opposition protesters occupy key Bangkok intersections and threaten elections due on Sunday (February 2). It stems from the country’s long-running internal divisions, rather than from the economic turbulence that has affected other emerging nations.
However, the unrest has had an effect on tourism and investor confidence in the Southeast Asian nation and the Stock Exchange of Thailand has lost roughly a third of its value since a May 2013 peak, while the baht has also suffered.
Prime Minister Yingluck Shinawatra is under pressure from protests, backed by the main opposition Democrat Party, that seek to topple her administration and install an unelected “people’s council” to implement vaguely-defined reforms before a poll in a year or more.
The election, which is being boycotted by the Democrats, is unlikely to draw a line under the political fractures in Thailand and with results potentially not released for weeks or months, the uncertainty could act to drag on the economy.
