On Wednesday, Citi provided an assessment of Turkey's economic outlook, emphasizing the importance of a credible policy narrative for the country's financial stability.
According to the financial services company, the future of Turkey's high-quality capital inflows and sustained macroeconomic stability hinges on the government's ability to promote a convincing policy mix and structural reforms.
Citi acknowledged the recent monetary policy tightening by Turkish authorities as a positive move towards rebuilding trust. However, the firm pointed out that a significant improvement in investor sentiment will require further unwinding of unorthodox regulatory measures and an increase in foreign reserves.
The analysis also highlighted concerns regarding Turkey's fiscal policy, noting that the projected budget deficit of 6.4% of GDP suggests a lenient approach. While Citi does not predict a deviation from the path of normalization in the immediate future, it cautions that the expected slowdown in economic activity during the second and third quarters could impact the progression of necessary stabilization and structural reforms.
Citi's commentary underscores the importance of prudent fiscal-monetary coordination and a well-structured reform agenda for Turkey to achieve lasting economic stability. The institution believes that without these critical steps, the country's efforts to stabilize its economy may be compromised.
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