Turkey: Current account balance records fourth consecutive monthly surplus in November
January 11, 2019
The current account balance recorded a USD 1.0 billion surplus in November, down from October’s revised USD 2.7 billion surplus (previously reported: USD 2.8 billion) but a marked turnaround from the USD 4.5 billion deficit observed in the same month last year. After deteriorating in annual terms for a prolonged period due to economic overheating, the current account balance has improved markedly since June due to the weaker lira and softer domestic demand.
November’s figure was underpinned by another goods surplus, on the back of depressed consumer spending and improved price competitiveness for Turkey’s exports. Moreover, the trade surplus in services broadened year-on-year to USD 1.5 billion, supported by greater tourism inflows.
On the financing front, there were USD 2.4 billion of net inflows in November, following net outflows in August-October, reflecting greater FX stability and reduced political uncertainty. November’s reading was driven by direct investment and portfolio inflows, and a reduction in banks’ currency and deposits held abroad. The current account surplus, coupled with capital inflows, led the Central bank to accumulate international reserves.
Turkey Current Account Balance Forecast
The current account is set to slip back into deficit this year, although as a percentage of GDP the shortfall is forecast to be the smallest in a decade due to suppressed domestic demand and the weak lira supporting exports. FocusEconomics Consensus Forecast panelists see the current account deficit at 2.5% of GDP in 2019 and 3.3% of GDP in 2020.
Author: Oliver Reynolds, Economist