(Investment) Exodus: Investors and Presidents

There were many things to emphasize about Turkey?s March Balance of Payments (BoP) statistics, which were released by the Central Bank and the Turkish Statistical Institute on May 12.

For one thing, at $5 billion, the current account deficit turned out to be higher than expectations of $4.3, rekindling fears that the narrowing of the deficit had come to an end. Even though I continue to expect a milder rebalancing than the consensus, I would not jump to that conclusion, as the difference stemmed mainly from lower-than-expected shuttle trade and services income.

Others emphasized what I call ?unidentified financing objects,? or UFOs, which are officially called net errors and omissions (NEOs). At $4.3 billion, NEOs had registered in February their largest figure since September 1998. That number was revised up to $4.6 billion, crowning that month as the month with the largest NEOs.

Still others emphasized the continuing decline in portfolio flows. Interestingly, hot money did not decrease, as the fall in portfolio inflows was more than replaced by the rise in foreigners? deposits at banks. However, foreign direct investment (FDI) continued its decline, falling from $5.4 billion annually in February to $4.8 billion in March.

Despite all these highlights, each of which would warrant a separate column, all the research reports and columns I read ignored the most important aspect of the data, which is related to FDI. Before sharing my secret with you, I should tell you that analysts usually report FDI as a net figure - the difference between foreigners? investment in Turkey and Turks? investment abroad, which is called outward direct investment (ODI). For example, during the past 12 months, FDI was $11.7 billion, while...