Bank of America: Turkey is the most resilient country against policy changes

In its "Global Economic Outlook" report, Bank of America provided an assessment of Turkey, describing it as the "most resilient country against policy changes."

Stating that "under the new economic program, the Turkish economy is rebalancing, inflation is falling, and the current account deficit is declining to more sustainable levels," BofA noted that Turkey's shift toward orthodox policies has created a unique narrative that could be quite resilient to most global shocks among Emerging Markets (EM).

'SENSITIVITY TO OIL PRICES PERSISTS'

"However, as an energy importer, sensitivity to oil prices remains. If US policy changes after the elections in a way that lowers global oil prices, both inflation and the current account could be positively affected," BofA observed, adding, "In the event of a shift toward more global protectionism, Turkey would be less affected by an increase in tariffs compared to other EMs, as the US share in its exports is only 6 percent."

BofA emphasized that Turkey has a customs union agreement with the European Union (EU), which prevents the imposition of any customs duties from that region.

'TURKEY IS WELL-POSITIONED TO RECEIVE FOREIGN DIRECT INVESTMENT'

Pointing out that China is not a major export market for Turkey, with a share of only 1.2 percent, BofA assessed, "If protectionism leads to an acceleration in the trend of nearshoring to China, Turkey could actually benefit from this as it has a geopolitical advantage in the region compared to its export competitors in Asia."

"Under the current financial stability program, we believe Turkey will be in a better position to receive Foreign Direct Investment (FDI) in the medium term," BofA stated, adding, "A strong dollar could create pressure on the Turkish Lira (TL), but given the CBRT's current foreign exchange policy and high reserve accumulation, we do not see this as a major risk."

BofA emphasized their view that the continuation of the policy status quo in the US would not pose a risk to Turkey's economic outlook.