Commerzbank’s Tatha Ghose flags a sharp March deterioration in Turkey’s balance of payments, with a near-doubling of the current-account deficit, heavy capital outflows and a record drop in official reserves. The bank argues underlying vulnerabilities predated the Iran conflict. With inflation seen accelerating and no further Central Bank of the Republic of Türkiye (CBRT) tightening, Commerzbank forecasts USD/TRY at 55.0 by year‑end, warning of higher disorderly depreciation risk. Turkish Lira (TRY)

BoP shock and policy stance pressure Lira

"Turkey's balance of payments data for March revealed sharp deterioration, coinciding with the outbreak of the energy price shock and other Iran disruptions to trade."

"The current-account deficit widened nearly to double at $9.7bn."

"Capital outflows intensified sharply, with portfolio investments seeing a net outflow of US$14.8bn and other investments recording $11.7bn outflow, leading to overall highly adverse financing flows."

"This culminated in a record US$43.4bn drop in official reserves."

"Going forward, inflation is expected to run faster, while reserves will likely continue to fall."

"The decision by CBRT not to tighten monetary policy against these developments makes the risk of a disorderly currency depreciation higher."

"We forecast USD/TRY to reach 55.0 by year-end."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)