Net External Financing Gap To Widen Significantly

Despite our forecast for Turkey's current account deficit to contract markedly in 2009 to 3.6% of GDP, we caution that the net balance of payments deficit is likely to widen considerably. We believe that the contraction in net portfolio and new foreign direct investments has much further to run in 2009, and the outlook for other investments is similarly weak, which will result in a sharp fall in the financial account surplus. This will accelerate the process of deleveraging in the domestic economy, reinforcing our below-consensus forecast for GDP to contract by a real 3.3%.

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