Turkey and the BRICS – Commerzbank

According to press reports, Turkish President Recep Tayyip Erdogan is seeking to have his country accepted into the group of BRICS states. This group of currently nine states (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, UAE) has no formal admission process, but I could well imagine that Turkey would be welcomed with open arms, Commerzbank’s Head of FX and Commodity Research Ulrich Leuchtmann notes.

Turkey's deficit current account needs constant financing

“With China, Russia and the UAE, three of the economies with particularly high current account surpluses are BRICS members. And because Turkey's notoriously deficit current account needs constant financing, it may seem favorable from Erdogan's point of view not to make the necessary capital inflow dependent on whether profit-oriented lenders consider his country an attractive target for capital flows from an economic point of view.”
“I think Turkey is an economy with extraordinary potential. It should, under normal circumstances, generate an environment in which capital providers line up to invest there. If the government has legitimate concerns about the stability of capital inflows, then these are due entirely to problems of its own making, in particular years of inappropriate monetary policy that have driven inflation to dizzying heights, forcing the central bank to respond with extremely high interest rates.”

“In an ideal world, a government would feel compelled by hesitant lenders to switch to a credible, lasting fight against inflation. Any attempt by Erdogan to secure capital inflows is also an attempt to avoid this step. This may enable the financing of the current account deficits for a long time; it does not bring Turkish politics any closer to a truly sustainable solution.”

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.