BMI forecasts the OPEC (Organisation of the Petroleum Exporting Countries) oil price basket will reach $111.47 per barrel in 2012, up from $107.52 in 2011, “creating downside risk for the Turkish macroeconomic outlook.”
Turkey’s reliance on energy imports is also a major factor behind its bloated current account deficit, which peaked in May 2011 at $86.6 billion. “Every $10 increase in average oil prices adds $4 billion to the current account deficit,” said Goldman Sachs Managing Director Ahmet Akarli, who co-heads the firm’s New Markets research team.
“You finance the deficit one way or the other, usually through debt — and foreign direct investment and equity — but mostly debt. This means Turkey’s balance sheet deteriorates… The stickiness of the energy bill is compromising a lot of growth (explain this) ,” he said.
The problem is likely to worsen rather than improve in the near-term, warned Akarli. “As income levels go up, energy needs increase and the steepest increase is when average income rises from zero to $25,000 per annum. This is what is happening in Turkey at the moment.”
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