Macroeconomic Forecast Turkey

September 2008 | Macroeconomic Forecasts

Net foreign direct investment in Turkey totalled US$7.5bn over the first seven months of the year, down markedly from the US$12.6bn and US$9.4bn net inflows recorded over the same period in 2007 and 2006, respectively. Worryingly, net portfolio investment has also come in much lower this year, at just US$2.5bn in January-July, down from US$8.5bn over January-July 2007. While we expect Turkey's improved political risk profile, following the July 31 constitutional court decision not to ban the ruling Justice and Development Party, to be a positive factor for future foreign investment inflows, there are reasons to remain cautious through the medium term. The forecast slowdown in the eurozone amid global financial market uncertainty will weigh on risk appetite for major investors. As such, our view is that a repeat of the US$20bn net FDI in 2006 and 2007 is unlikely to occur in 2008 and 2009.

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