Turkey: Current account balance remains in deficit in September
October 12, 2020
The external sector continued to deteriorate at the close of the third quarter, with the current account registering a USD 2.4 billion deficit in September (September 2019: USD 2.8 billion surplus) and marking the 10th consecutive shortfall. On a 12-month rolling basis, the current account deficit rose to USD 27.5 billion in September (August 2020: USD 23.2 deficit). This marked the worst reading since November 2018.
The annual deterioration in the current account balance reflected a much smaller services trade surplus and a marked uptick in the merchandise trade deficit. The services trade balance has been hit by the fallout from the global pandemic: The tourism sector has been battered by foreign travel restriction to curb the spread of the coronavirus. In September, tourist arrivals were down nearly 60% year-on-year. Meanwhile, strengthening domestic demand was behind the widening merchandise trade deficit as imports surged 22.3%—the strongest rise in imports since January 2018. Exports returned to growth for the first time in seven months, likely aided by the reopening of economies in Europe and beyond. Moreover, the weakening of the Turkish lira likely further aided the external sector through more competitive exports.
On the financial front, there was a net outflow of USD 1.2 billion in September, notably up from the net outflows of USD 0.3 billion in the same month a year prior (August 2020: USD 0.2 billion net outflow). The print was driven by greater residents’ outflows than non-resident inflows. Lastly, official reserves decreased by USD 3.6 billion in September.