Economic crisis in Turkey and Argentina lead to talk of "contagion", fears of panic spreading
Economic crises in Turkey and Argentina have led to talk of "contagion" - the danger of financial problems in one country spilling over into others. Turkey has struggled with a falling currency and worsening relations with the US. A spiralling crisis in Argentina prompted the government to announce austerity measures and to ask the International Monetary Fund (IMF) for an early release of a $50bn loan.
The sharp falls in the value of Turkey's lira and Argentina's peso have led to fears that currencies from South Africa to Russia will follow suit. In Asia, India's rupee and Indonesia's rupiah have already been hit. Put simply, contagion is a self-fulfilling process, whereby economic problems in one country prompt investors to sell assets in economies with similar risks.
In a globalised world, a crisis in one country can also quickly spread to others through trade links or lending by banks. That is why a downturn in Turkey or Argentina matters to foreigners - beyond making holidays there cheaper. Trade is the obvious way for trouble in one country to affect another.
When an economy begins to falter, companies tend to cut production and then jobs. As a result, consumers have less money to spend on goods, including imports. This is bad news for global businesses that export a lot of goods to the country. If a crisis also causes a country's currency to weaken, the cost of imports rise, further hurting demand.
https://www.bbc.co.uk/news/business-45191872
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