July 14 (Bloomberg) -- Turkey’s current-account deficit will rise to 10.8 percent of gross domestic product in 2011 while the lira will weaken to 1.7 per dollar by year-end, BGC Partners chief economist Ozgur Altug said in an e-mailed report.
The Istanbul-based brokerage raised its deficit forecast from 9.8 percent of GDP and the lira forecast from 1.55 per dollar as the central bank looks increasingly unlikely to change its loose monetary policy, according to the report today.
At its last investor meeting in Ankara, the central bank “signaled that it does not plan to hike its policy rate soon. In fact, the bank is concerned about rising global uncertainties that could force it to ease all monetary policy instruments,” Altug said.
The current account and lira outlook may worsen in the short-term as expectations of tax increases on vehicle and clothing imports probably spurred extra ordering demand for those products in June and July, Altug said. Turkey’s net energy bill will also increase on higher prices, he said.
The economy is slowing down, “but that does not necessarily mean the widening current account deficit should reverse,” the report said. “The Turkish economy will be slowing down from a base which was very close to overheating, and even that slowdown will mean strong growth.”
BGC delayed its expectation for a rate hike from 2011, predicting a 150 basis point hike in early 2012, according to the note.
“This year all factors are working against Turkey,” it said, and measures such as the export-import coverage ratio “are about to reach critical levels.”
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