Analysts at Danske Bank look for the USD/TRY to trade at 5.90 in 3 months, at 6.10 in 6 and at 6.20 in a year. Regarding the Turkish economy, they expect more support will come from advancing monetary easing and exports on a weak TRY. They see 2019 GDP to contract 1.6% y/y and expand 1.7% y/y in 2020 and 2.6% y/y in 2021.
Key Quotes:
“Turkey’s central bank (TCMB) continued its sharp cuts in Q3 19, lowering the key rate by 325bp to 16.50% as inflation continued to fall. There has been a clear shift in the TCMB’s stance after a change in governor earlier in 2019. We expect inflation will continue to decrease slowly, staying in double-digit territory through H2 19. However, we expect more cuts by the TCMB in Q4 19, as there is still room for a positive real rate and the Turkish economy badly needs monetary stimulus on global monetary easing.”
“The TRY has stabilised on continuing global monetary easing, while quick monetary easing by the TCMB has, not surprisingly, hit the TRY. Decelerating inflation and a dovish central bank fuel our expectations of economic stabilisation and growth in 2020.”
“Major downside risks to our TRY forecasts include a hawkish Fed, renewed political pressure on the TCMB, further escalation of the trade war and geopolitical confrontation with the US on Russia’s air defence system. A possible oil price spike on geopolitics we expect would weigh on the TRY further.”
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