Turkey, in which direction...

How do we interpret the macroeconomic figures about Turkey?

Are we 100% certain about Turkey moving on the right track?

I've got some cold facts which can make you think about the expectations from oncoming year.

With our current account deficit (cad) of $65.1bn (nearly doubled the last years $33.5bn during Jan.-Oct. period - source: CBRT) and cad to gdp ratio of -9.8% in 2011Q2 (source: OECD) we are hoping a sustainable growth rate for 2012.

There is no need for panic because our financial account (85.6% of cad) can fill the gap. The most important thing is its content: $11.5bn FDI-foreign direct investment during Jan.-Oct. period (nearly 18% of cad) and $13bn (20% of cad) portfolio investment could be the short-term cure for our concerns. Nevertheless I think, with risk appetite diminishing and more bearish movement took place in the last half of 2011, the emerging markets are severely wounded. The main point of increase in portfolio investment is the sovereign bonds ($13.9bn). Actually that means Turkey does have higher interest rates than other countries for keeping the hot money alive.

Another interesting point is that we have a huge amount of net errors and omissions ($13.1bn - 20.2% of cad) of which's source CBRT assumes as tax reconciliation.

I took a look at OECD numbers about FDI inflows by industry (2000-2010) and I realized that the record amount of $22.0bn in 2007 has never reached again. Even with the cheap raw mateial funding in 2008-2009 this number respectively was $19.5bn and $8.4bn.

Again I am saying "don't get easily frustrated by Turkey". Our industirial production in October rose 7.3% yoy nsa and 4.4% mom sa, with both numbers beating market estimations. The positive results coming from there give us support for revising up 4Q2011 gdp ratio. Another surprise was countries 3Q2011 gdp growth: with 8.2% yoy in 3Q2011 and 9.6% (3 Q's cumulative) Turkey's shining 9.0% growth performance in 2010 is continuing. With deterioration in USD/TRY it is normal to have cpi and ppi increased 9.48% and 13.67% yoy respectively in November. The CBRT keeps on defending its idea of passthru effect which is caused by devaluation in TRY since European debt crisis.

To be an emerging market (em) has its disadvantages during global crisis or slowdowns. "Flight to quality" always does more damage to em's than developed ones. This is the price which em's are obliged to pay. Be always prepared to play tuff.