Current Account Deficit Risks To Return

Our long-held view for the Turkish current account deficit to widen substantially in 2010 is playing out and we maintain our forecast for the shortfall to increase to US$33.6bn (4.6% of GDP) by end-year. This is a positive signal, reinforcing our view for a strong domestic demand recovery and healthy foreign investment inflows. We caution though, that over the long run, a sustained widening of the current account deficit could signal a bubble in local asset prices and elevated macroeconomic risks caused by an over-reliance on external investment.

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