Turkey: Current account balance records first surplus in nearly three years in August

The current account balance recorded a USD 2.6 billion surplus in August, markedly contrasting the USD 0.9 billion deficit observed in the same month a year earlier and marking the first surplus since September 2015. After deteriorating in annual terms for a prolonged period due to government stimulus measures, the current account balance has improved since June due to the weaker lira and ebbing domestic demand.

August’s figure was underpinned by a substantial reduction in the goods deficit, which narrowed year-on-year from USD 4.3 billion to USD 1.3 billion. In addition, the trade surplus in services broadened year-on-year from USD 3.9 billion to USD 4.6 billion, partly on greater tourism receipts.

On the financing front, there were USD 14.4 billion of net capital outflows in August. This was a result of net outflows of portfolio investment, and an increase in banks’ currency and deposits held abroad amid heightened instability in financial markets following the currency crash.

Turkey Current Account Balance Forecast

Going forward, the huge currency depreciation this year and signs of a rapid cooling in domestic activity should help strengthen the external position. Last month, FocusEconomics Consensus Forecast panelists expected the current account deficit to reach 5.9% of GDP in 2018 and 4.1% of GDP in 2019. A new Consensus Forecast will be released on 30 October.