Deficit and jobs Turkish economy's Achilles heel, report saysA new challenge for emerging economies, including Turkey, is to the stop short-term flow of hot money, says Bülent Altınel (3rd L), an Ata Invest executive. A new challenge for emerging economies, including Turkey, is to the stop short-term flow of hot money, says Bülent Altınel (3rd L), an Ata Invest executive. A report by an independent investment banking operation has warned investors that hot money inflows, a climbing foreign deficit and unemployment will likely remain key challenges the well performing Turkish economy will have to face in 2011. The report, “Directing the Flow,” by independent operation Ata Invest indicates that one of the main challenges to emerging economies, including Turkey, is to stop the short-term flow of hot money, Bülent Altınel, general manager of the group, said at a press meeting in Istanbul on Tuesday. “We do not expect much growth in eurozone countries except Germany in this year,” Doctor Nuran Toğuç, Ata Invest chief executive, said at the meeting, adding that drag on growth is daily increasing pressure on the euro. The management of the foreign trade deficit has not been a serious matter for Turkey, Toğuç said, adding that the financing quality of the deficit decreased last year. Last year the level of foreign investment remained lower than that of 2009, Toğuç said. “Nearly 80 percent of foreign investment in Turkey comes from European countries and there is no doubt that the wounded economies of the eurozone caused a decrease in foreign direct investments in Turkey.” As the appetite for certain European markets to take risks decreases, Turkey may have to face the struggle of financing its foreign trade deficit with short term hot term money inflows this year, she said. Turkey’s unemployment rate of 11.4 percent remains alarmingly high as far as the economy’s future is concerned, Toğuç said. “Turkey’s unemployment rate has dropped from 16 percent in 2009, to the current level of 11.4 percent,” she said, adding that unemployment was luckily to decrease to 11 percent by this year. Ata Invest is backing government reforms intended to “battle unemployment,” she said. Toğuç told the Hürriyet Daily News & Economic Review that Turkey’s export volume was worth $103 billion and imports $162 billion. As a result of such a performance, Turkey’s foreign trade deficit, which was around $39 billion in 2009, grew to approximately $59 billion in 2010 according to official figures, Toğuç said. The peaking foreign trade deficit is caused by rising demand in the country, competitive devaluations throughout the world, an uneasy feeling among many European markets and increased oil prices, she said. “As long as Turkey remains dependent on energy imports the deficit will continue to increase.” According to the report, the Turkish Lira lost value against the U.S. dollar in 2010 in general, closing the year at 1.55. In the long run, exchange rate battles will remain controversial as lira and dollar parity is expected to float between 1.67 liras and 1.45 liras. The report said the euro would continue to loose value against the dollar this year, possibly falling as low as 1.20.

A new challenge for emerging economies, including Turkey, is to the stop short-term flow of hot money, says Bülent Altınel (3rd L), an Ata Invest executive.

A report by an independent investment banking operation has warned investors that hot money inflows, a climbing foreign deficit and unemployment will likely remain key challenges the well performing Turkish economy will have to face in 2011.
The report, “Directing the Flow,” by independent operation Ata Invest indicates that one of the main challenges to emerging economies, including Turkey, is to stop the short-term flow of hot money, Bülent Altınel, general manager of the group, said at a press meeting in Istanbul on Tuesday.
“We do not expect much growth in eurozone countries except Germany in this year,” Doctor Nuran Toğuç, Ata Invest chief executive, said at the meeting, adding that drag on growth is daily increasing pressure on the euro.
The management of the foreign trade deficit has not been a serious matter for Turkey, Toğuç said, adding that the financing quality of the deficit decreased last year.
Last year the level of foreign investment remained lower than that of 2009, Toğuç said. “Nearly 80 percent of foreign investment in Turkey comes from European countries and there is no doubt that the wounded economies of the eurozone caused a decrease in foreign direct investments in Turkey.”
As the appetite for certain European markets to take risks decreases, Turkey may have to face the struggle of financing its foreign trade deficit with short term hot term money inflows this year, she said.
Turkey’s unemployment rate of 11.4 percent remains alarmingly high as far as the economy’s future is concerned, Toğuç said. “Turkey’s unemployment rate has dropped from 16 percent in 2009, to the current level of 11.4 percent,” she said, adding that unemployment was luckily to decrease to 11 percent by this year. Ata Invest is backing government reforms intended to “battle unemployment,” she said.
Toğuç told the Hürriyet Daily News & Economic Review that Turkey’s export volume was worth $103 billion and imports $162 billion. As a result of such a performance, Turkey’s foreign trade deficit, which was around $39 billion in 2009, grew to approximately $59 billion in 2010 according to official figures, Toğuç said.
The peaking foreign trade deficit is caused by rising demand in the country, competitive devaluations throughout the world, an uneasy feeling among many European markets and increased oil prices, she said.
“As long as Turkey remains dependent on energy imports the deficit will continue to increase.”
According to the report, the Turkish Lira lost value against the U.S. dollar in 2010 in general, closing the year at 1.55. In the long run, exchange rate battles will remain controversial as lira and dollar parity is expected to float between 1.67 liras and 1.45 liras. The report said the euro would continue to loose value against the dollar this year, possibly falling as low as 1.20.