Istanbul, July 29 () - Turkey’s external position was weaker than the level consistent with medium-term fundamentals and given large financing needs and short-term nature of capital inflows, Turkey remains vulnerable to capital flow reversal, said the International Fund on July 28 in an analysis about countries’ external sector report for 2015.
“Developments so far in 2015 suggest some strengthening of the external position in Turkey, mainly due to terms of trade gain from lower oil import prices. However, net international reserves are still low, and the net international investment position (NIIP) will continue to deteriorate until the current account deficit is narrowed” said the IMF.
Gross external financing needs are estimated at over 25 percent of GDP in 2015, making Turkey vulnerable to changes in global market conditions, according to the IMF.
Reducing further the current account deficit is necessary to diminish vulnerabilities and monetary policy should keep real interest rates solidly in positive territory, said the IMF.
“The Central Bank should increase net international reserves, limiting foreign exchange intervention to smoothing periods of excessive volatility. Structural reforms aimed at increasing private sector saving, including pension reform, are needed to enhance private saving and allow high growth with a sustainable current account deficit. These reforms should be supported by fiscal policy tightening over the medium term to increase public saving,” it added.