Fitch analyst urges IMF deal

Bloomberg

While Turkey may be able to manage without IMF money, signing a new agreement would be "prudent," Parker, who’s in charge of sovereign ratings for emerging European economies at Fitch, said in an interview at a conference in London on Wednesday.

Turkey’s last loan accord with the IMF ended in May 2008 and the government has declined to sign another one. Prime Minister Recep Tayyip Erdoğan said on June 4 that he won’t agree to "damaging" and "political" IMF conditions, and that investors shouldn’t take a new Fund loan for granted.

Turkey’s current account is "adjusting impressively," Parker said. Still, the country can’t be certain of attracting enough money from abroad to cover the gap, especially since much of the capital inflows that have financed the deficit this year have been recorded as unexplained errors and omissions, he said.

"If the Turkish authorities don’t know what it is, they can’t be sure it’s going to continue," Parker said. "If that was to dry up, Turkey would need an IMF program."

The current account gap narrowed to $1.16 billion in the first quarter from $12.3 billion a year earlier as oil prices dropped and demand for imports slumped.

Meanwhile, Bank of America-Merrill Lynch strategists led by Benoit Anne increased their forecasts for the Turkish Lira, the Hungarian forint and the South African rand.

The forint will weaken to 315 per euro in September, or less than the 330 expected in a report published April 28, while the rand is forecast to decline to 9 per dollar in September, less than the 10 per dollar Bank of America expected before.

"We continue to think that the rand may go through a correction going forward, albeit a much less pronounced one," the strategists wrote.

The lira will slip to 1.70 per dollar in September, Bank of America wrote.