Wednesday, June 23, 2010

A Question on Current Account Deficits

Mr. Swine Flu decided not to leave; now, he is charging his Iphone. Maybe, I should leave, but I just decided to test my immune system, so a final post before I leave for my morning meeting at Hurriyet:
A loyal reader asked me the following question for Turkey:
What is the current account balance for Turkey? Is trade deficit an issue and how is it best addressed?
She was inspired by the ranking of countries according to their current accounts, where Turkey is at the very bottom.The first part of the question is easy to answer, and as always, a picture is always worth more than a thousand words:
As for the second question, the one-line answer is: Not as long as it is financed. That single sentence is not as innocent as it looks; for one thing, it reveals my view of International Macro. But I need to provide a detailed answer to my reader's question and rather than write a five-page expose, given the slacker I am, I will refer her to a summary that is more or less in line with my view.

In Turkey's case, the problem is rising from more of a chronic savings deficit rather than an investment boom, for which there is no easy fix.

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