Turkey—A Short-Term Reprieve Amidst Persistent Uncertainties

PGIM Fixed Income

August 2019

Jürgen Odenius, PhD, Economic Counsellor, Macroeconomic Research Team and James Hyde, Credit Analyst, European Corporate Bond Research Team

Turkey’s economic crisis erupted one year ago, and PGIM Fixed Income recently returned to the country to gauge the outlook going forward. While Turkey’s large external financing requirements remain its key vulnerability, funding flows should continue normalizing.

In this context, it is noteworthy that political uncertainty appears to have “troughed.” Growth apparently remains the overarching priority of economic policy, and any policy missteps risk draining the rather limited (unencumbered) official FX reserves. However, in such a scenario, the authorities could turn to the IMF as a last resort. On balance, we remain cautiously constructive on Turkey’s outlook.