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Goldman Sachs See Increasing Likelihood of TRY Adjustment Lower

TURKEY
  • Under current fundamentals, Goldman Sachs’ model suggests that TRY may need to weaken by 10% in real trade-weighted terms, with more depreciation required if the current account deficit widens further. From current spot levels, this would take USD/TRY close to 23. But, with inflation still expected to be averaging close to 30% next year, the degree of nominal depreciation over the longer-term would likely have to be larger, they say.
  • Goldman Sachs economists note that because of seasonal tourism revenues during the summer months, the authorities may be able to delay a sharp FX adjustment. That said, given that municipal elections are scheduled for April 2024, it is also possible that the authorities might opt for an earlier adjustment.
  • Set against this, Goldman Sachs believe the choice of Mehmet Simsek as the new treasury and finance minister increases the likelihood that monetary policy will shift towards a more orthodox direction.
  • Goldman Sachs revise their USD/TRY forecasts higher to 23.00, 25.00 and 28.00 in 3-, 6- and 12-months (versus 19.00, 21.00 and 22.00, previously).
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