Institue of intl finance: "Capital flows into Turkey will accelerate"

Private capital flows to emerging markets should top $1 trillion this year, fueling growth in the global economy, according to a new report by an international banking association. According to the report, released Wednesday by the Institute of International Finance (IIF), Turkey will attract a large of these inflows. IIF Deputy Director Jeremy Lawson, who does global macroeconomic analysis, said last year's $45 billion capital flow to Turkey will rise to $74 billion this year and $80 billion in 2012. Turkey is the only country where aggregate lending activity in emerging Europe isn't below pre-crisis levels, the IIF report said, noting that credit growth was "running around 40 percent." In Turkey, credit growth "has yet to respond significantly, however, which highlights that macro prudential measures are most successful when part of a suite of policy responses to deal with the pressures of rising inflation, rising credit growth and strong capital flows." Despite policies aimed at discouraging short-term inflows, Turkey will "remain the country most exposed to such inflows in the region," the IIF said. "Turkey remains most exposed to abrupt shifts in market sentiment given its high dependence on short-term capital and volatile portfolio debt inflows."