Fresh anxieties over Turkey's overheating economy emerged on December 11 as newly released data showed the country's 12-month current-account deficit widened to $41.9bn in October, the highest figure seen since 2015—and that was despite the real effective exchange rate (REER) on the Turkish lira (TRY) tumbling to its lowest level in 14 years.

Such a low level of trade-weighted measure REER should theoretically boost the Turkish export value to the detriment of the value of imports, but that hasn't happened. Instead the world-beating GDP growth of 11.1% announced on December 11 for the third quarter was driven by government-backed credit stimuli that also drove imports.

Turkey's economic health, it is clear, is dangerously reliant on hot inflows of foreign external financing to enable growth.

Even though the central bank has upped borrowing costs by around 400 basis points this year, the TRY has continued to devalue.

“The rate hikes didn’t really mean tightening of domestic monetary conditions,” Inan Demir, an economist at Nomura in London, told Bloomberg last week. “Unless pro-growth measures stop, the currency will need to drop further to help the current-account balance adjust,” he said.

The market consensus appears to be that the central bank's monetary policy committee meeting on December 14 will have to push up interest rates by at least 100bp to avoid exposing the lira to another round of depreciation. Worries that the Turkish government is standing in the way of the regulator pursuing further monetary tightening have eased in the past few days, helping the TRY to recover some ground.