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Goldman Sachs ups Turkey’s deficit forecast to $43bn

REUTERS/Lucas Jackson
The US investment bank expects the deepening in credit contraction and negative loan growth in August,are likely to slow domestic demand in Turkey

Goldman Sachs raised its forecast on Tuesday for Turkey’s 2023 current account deficit to $43 billion from a previous $38 billion, after it said it “deteriorated sharply” in July.

“(I)ncorporating higher oil prices, we now expect Turkey’s current account deficit to reach $43 billion (previously $38 billion) for 2023 as a whole,” the Wall Street bank said, adding that the figure should however “improve going forward”.

“We think the upward tax adjustments, and the deepening in credit contraction, with loan growth turning much more negative in August, are likely to slow domestic demand and therefore lower imports further in the remainder of the year,” it said.

Central bank data on Monday showed that the country’s current account deficit amounted to $5.466 billion in July.

Earlier this month Moody’s signalled that Turkey’s re-embrace of conventional economic policymaking since Tayyip Erdogan’s May election win could soon start paying dividends in terms of a stronger credit rating, as long as it sticks with it.

“The change of course is clearly credit positive,” Moody’s analyst Dietmar Hornung told Reuters. “But there are still significant uncertainties.”

Moody’s rates Turkey a ‘junk’ grade B3 with a “stable outlook.”