Central Bank net reserves may turn positive: Goldman Sachs

ISTANBUL

The Turkish Central Bank’s net reserves are likely to turn positive in 2024, according to analysts at Goldman Sachs.

In a note on the Central Bank’s latest rate decision, Goldman Sachs said that it expects rising foreign inflows and a narrower current account deficit to pull the rate of Turkish Lira appreciation further inside the forwards in 2024.

The investment bank stressed that the Central Bank’s Monetary Policy Committee for the first time directly mentioned -in the statement accompanying the rate decision- real appreciation of the local currency by tight monetary policy to be a key element of disinflation instead of “only commenting on FX stability.”

“And we think it is more likely to than not the Central Bank’s net reserves, fully accounting for both legs of its bilateral and bank swaps, are likely to turn positive in 2024,” said Goldman Sachs economists.

The Central Bank’s net reserves were negative $28.5 billion in the week ending Feb. 26.

As universally expected, the Central Bank paused the 8-month tightening cycle last week and kept the policy rate unchanged at 45 percent.

“We continue to expect the Central Bank to be able to start easing monetary policy from the third quarter onwards when we forecast that sequential price pressures will fall sharply in line with our below consensus inflation forecast of 30 percent at year-end,” they said.

Goldman Sachs economists added that they continue to expect the Central Bank to introduce new measures to curb the recent spike in credit card spending.