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Turkey: Slow adjustment, not crisis

The Emerging View

16 October 2013

During the summer of 2013 sentiment about Emerging Markets deteriorated to the worst levels seen since 2008/2009. Turkey was singled out for special treatment in the sell-off. Critics focus on the country’s large current account deficit, the dependence on short-term portfolio flows to fund this deficit, and rapid growth of domestic credit.1 The heterodox central bank, the bears say, is too focused on delivering high growth in the short term at the expense of price stability, while the government ignores the tough decisions required to produce a higher trend growth rate that can be sustained through the economic cycle.

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