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Goldman Sachs See USD/TRY Trading at ~37 in 12-Months, Revise 3- and 6-Month Forecasts Higher

TRY
  • Goldman Sachs expect the trend of declining inflation momentum to continue, and therefore forecast end-year inflation at 30%, compared with consensus of 42.6%.
  • Using the GDP deflator, Goldman Sachs find that the current real exchange rate is already near to its 2019-2021 average level, suggesting that nominal depreciation can slow down from here to a pace that captures their below-consensus inflation forecast.
  • Goldman Sachs combine this analysis with their estimate that USD/TRY needs to move around 24% higher from here to account for 2024 inflation developments. As a result, they see USD/TRY trading around 37 in 12 months, which is 22% above current spot levels. Still, this is well below the 12-month forward, which prices a depreciation rate of close to 44%.
  • Goldman Sachs assume a linear path of depreciation and thus revise their 3- and 6-month forecast to 32 and 34 respectively (from 29 and 31, previously). However, given the upcoming local elections at the end of March, they note that it is possible that the pace of depreciation slows ahead of the event.
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