Turkey’s economy is better placed to face the current energy price shock than it was in 2022, but it is still among the more vulnerable EMs. A temporary price spike will only have a modest effect on the current account deficit, but the inflationary impact could prompt interest rate hikes as soon as tomorrow’s MPC meeting. A larger and more prolonged price spike would create more severe balance of payments strains, renewed downward pressure on the lira and set the rebalancing process back some way.
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