Turkey and BRICS – Commerzbank

According to media reports, Turkish President Recep Tayyip Erdogan is seeking to have his country accepted into the BRICS group of nations. This group of nine states currently (Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Iran, United Arab Emirates) does not have a formal admissions process, but I could well imagine that Turkey would welcomed with open arms, Commerzbank’s head of FX. and Commodity Research Ulrich Leuchtmann notes.

Turkey’s current account deficit needs constant financing

“With China, Russia and the United Arab Emirates, three of the economies with particularly large current account surpluses are BRICS members. And because Turkey’s notorious current account deficit needs constant financing, it may seem favorable from Erdogan’s point of view that the necessary inflow of capital does not depend on whether profit-oriented lenders find his country an attractive target for capital flows from economic point of view. “
“I think Turkey is an economy with tremendous potential. It should, under normal circumstances, generate an environment where capital providers line up to invest there. If the government has legitimate concerns about the stability of capital inflows, then they are entirely due to its own problems, particularly years of inadequate monetary policy that have driven inflation to dizzying heights, forcing the central bank to respond with extremely high interest rates. rates.”

“In an ideal world, a government would feel compelled by reluctant creditors to mount a credible and lasting fight against inflation. Any attempt by Erdogan to secure capital inflows is also an attempt to avoid this step. This can allow current account deficits to be financed for a long time; it does not bring Turkish politics closer to a truly lasting solution.”