Goldman: Portfolio outflows are temporary, normalization will occur after the election

While the recent trend of portfolio outflows in Turkey and the parallel decline in the Central Bank of the Republic of Turkey's (TCMB) reserves have drawn attention, Goldman Sachs economists have predicted that normalization will occur after the election.

In a note dated March 8 prepared by Goldman Sachs economists Clemens Grafe and Başak Edizgil, it was stated that the downward trend in the TCMB's reserves continues and that this situation likely reflects capital outflows.

In the report, the economists shared the view that the deterioration in the TCMB's foreign exchange position was caused by a combination of factors, including capital outflows due to the local elections in March, the seasonally weak current account balance, and the conversion of maturing foreign exchange-protected accounts into foreign currency abroad.

The economists stated that they found the scale of these outflows surprising and that they believe they are temporary and will normalize after the elections.

Nevertheless, Goldman Sachs economists emphasized that the probability of the TCMB raising the policy rate further to offset capital outflows at the next policy meeting to be held this month before the elections has increased.

News Source: 12punto