Time after time, we saw striking warnings about Turkish economy in reports, published by many huge international institutions. Once for all, Nomura, position Turkey at a more risky place than it does Indonesia and Brazil (in other words BIITS).

Since the end of 2009, Nomura is publishing Global Emerging Markets Risk Index (GEMaRI) scores, which casts light on the underlying fragility of each emerging market. Frankly speaking, this index is not a actual indicator for investors’ choice which market to pull out of. Here’s the official definition of the GEMaRI.

GEMaRI calculates the risk of currency crises occurring in 35 emerging market economies over the following 12 months and assigns a score to each country. The index incorporates 16 specially selected and weighted indicators which are integral to accurately measuring the risk of a currency crisis in an emerging market economy.

According to this index, there are four big signs of an upcoming currency crisis;

• a hike in the real interest rate of more than 2 percentage points over the quarter (absolutely no expected in Turkey),
• a fall in FX reserves relative to short-term external debt (according to CBT data, this is getting real),
• a current account deficit larger than 3.5% of GDP (Excluding the recession periods, this ratio was never lower than 3.5%, in no uncertain terms, we welcome this sign),
• and a FX-to-imports ratio of less than 4.

Here is the list of the countries ranked by Nomura.

Depending upon Nomura’s methodology, Turkey is one of the most risky countries among emerging markets when it comes to speaking of a currency crisis.

It is hard to forecast how this strategy will work in future, as many investors just play a wafting game.