Turkey will be one of the most preferred countries in the second and third quarters

Marek Drimal, the Chief Strategist for CEEMEA (Central and Eastern Europe, Middle East, and Africa) at Societe Generale, stated that Turkey could be one of the most favored countries by foreign investors this year. Speaking to EKONOMİ newspaper, Drimal said, “If our prediction of three interest rate cuts by the Fed this year comes true, we believe this will encourage inflows into emerging markets and Turkey.

He went on to say; “We expect Turkey and the Turkish Lira to be among the most preferred among emerging markets in the second and third quarters of 2024.” Drimal also expressed their belief that Poland would also be among the rising markets in Latin America and the Central and Eastern Europe region.”

• With the local elections behind us, do you expect an increase in foreign exchange inflows into Turkey?

“There were some noticeable inflows into Turkish assets towards the end of 2023, but these did not continue into the first quarter of 2024. Conversely, there was some further erosion in the foreign exchange reserves of the Central Bank of the Republic of Turkey (TCMB) in February and March. We expect this to change based on two significant factors. Firstly, the interest rate differential will improve thanks to the FOMC interest rate cuts starting from June. Secondly, Turkey’s current account balance is expected to improve due to structurally betterment resulting from lower seasonal energy imports, higher tourism income inflows, and tight monetary policy.”

• Would you like to share your predictions regarding the trajectory of the Turkish Lira in the upcoming period?

“We were expecting the USD/TRY exchange rate to be around 32 in the second and third quarters of this year. We anticipate the Turkish Lira to depreciate in the near term due to the Central Bank of the Republic of Turkey’s preference for restructuring reserves. However, we expect the Lira to strengthen towards the end of the second quarter and into the third quarter. Subsequently, due to adverse seasonality in the current account balance, we anticipate a renewed weakening in the final quarter of the year.”