The Turkish central bank is not having an easy time. Despite its efforts to prevent a widening of the current account deficit there are no signs of improvement so far.
On the contrary, we expect that persistently high import prices (in particular oil) will have a substantial impact on the country’s import growth, bringing the current account to the abyss. We expect the deficit to expand to a hefty 9% for this year and next, with the threat of a current account crisis thus hanging over the lira like the sword of Damocles. We revise our EUR-TRY outlook upwards as we do not expect the imminent monetary policy reversal to bring sustainable relief for the lira any longer.
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