Turkey’s external position still in dire straits

Last week’s surprise interest rate cut by Turkey’s central bank is particularly worrying given the backdrop of the country’s fragile external position. While the current account deficit has narrowed and the central bank’s net FX reserves have increased this year, large short-term external debts leave the lira vulnerable to sharp falls in the event that further aggressive monetary easing triggers a slowdown in capital inflows.
Jason Tuvey Senior Emerging Markets Economist
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