Turkey: Current account balance records third consecutive monthly surplus in October
The current account balance recorded a USD 2.8 billion surplus in October, up from September’s USD 1.8 billion surplus and a marked turnaround from the USD 3.8 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.
October’s figure was underpinned by the first goods surplus in nearly a decade (USD 0.8 billion), thanks largely to depressed consumer spending and improved price competitiveness for Turkey’s exports. Moreover, the trade surplus in services broadened year-on-year to USD 3.0 billion, supported by greater tourism inflows.
On the financing front, there were USD 1.4 billion of net outflows in October, despite the government’s recent USD 2.0 billion Eurobond sale supporting portfolio investment. However, October’s outflow was smaller than September’s USD 5.0 billion figure and far below the huge capital outflow observed in August, a month which saw huge FX and financial market volatility. October’s reading was driven by an increase in banks’ currency and deposits held abroad.
Regarding the capital account, Muhammet Mercan, ING’s chief economist for Turkey, comments:
“Overall, the October data shows that outflows have further moderated compared to August and September, becoming less of a market concern. However, the outlook will likely remain challenging given the sizeable total external financing needs in the period ahead, mostly due to private debt amortisation. This will likely keep Turkey vulnerable to shifts in global risk appetite.”