Turkey’s current account deficit: recession in the making?

Turkey’s economy looks increasingly in danger of going from boom to bust. Rapid growth in domestic demand has led to a surge in imports and a widening current account deficit that, in light of recent market turbulence, looks increasingly unsustainable. We suspect that Turkey will need to make a painful adjustment to bring its current account deficit back to sustainable levels sooner rather than later and that as a result the economy is likely to slide into recession in 2012.