Turkey: Current account deficit widens as Covid-19 extinguishes foreign demand
Turkey’s current account deficit widened notably in March to USD 4.9 billion from USD 0.1 billion in March of last year (February 2020: USD -1.2 billion). The print marked the fourth consecutive monthly shortfall and the largest deficit since May 2018. Consequently, the current account surplus narrowed on a 12-month rolling basis from USD 6.3 billion in February to USD 1.5 billion, the smallest in nearly one year.
The widening of the deficit year-on-year has been heavily influenced by the Covid-19 pandemic wreaking havoc on international trade and tourism, with much of Europe on lockdown in the month: Exports fell a steep 18.0% (February: +2.0% year-on-year), the largest contraction in over four years, while imports expanded 3.4% (February: +9.7% year-on-year). Meanwhile, the services trade surplus narrowed as well; tourism has been particularly hard hit by the pandemic, which has seen widespread travel restrictions put in place.
On the financial front, there was a net outflow of USD 7.7 billion, up from the USD 1.6 billion outflow recorded in the same month of the prior year (February 2020: USD 3.2 billion inflow). The outflow of capital was driven by foreign banks and foreign nationals limiting their exposure to Turkey and debt repayments by Turkish banks and firms. Moreover, the country’s already very low international reserve assets plunged by USD 16.6 billion in the month.
Turkey’s current account deficit widened notably in March to USD 4.9 billion from USD 0.1 billion in March of last year (February 2020: USD -1.2 billion). The print marked the fourth consecutive monthly shortfall and the largest deficit since May 2018. Consequently, the current account surplus narrowed on a 12-month rolling basis from USD 6.3 billion in February to USD 1.5 billion, the smallest in nearly one year.
The widening of the deficit year-on-year has been heavily influenced by the Covid-19 pandemic wreaking havoc on international trade and tourism, with much of Europe on lockdown in the month: Exports fell a steep 18.0% (February: +2.0% year-on-year), the largest contraction in over four years, while imports expanded 3.4% (February: +9.7% year-on-year). Meanwhile, the services trade surplus narrowed as well; tourism has been particularly hard hit by the pandemic, which has seen widespread travel restrictions put in place.
On the financial front, there was a net outflow of USD 7.7 billion, up from the USD 1.6 billion outflow recorded in the same month of the prior year (February 2020: USD 3.2 billion inflow). The outflow of capital was driven by foreign banks and foreign nationals limiting their exposure to Turkey and debt repayments by Turkish banks and firms. Moreover, the country’s already very low international reserve assets plunged by USD 16.6 billion in the month.
Turkey’s current account deficit widened notably in March to USD 4.9 billion from USD 0.1 billion in March of last year (February 2020: USD -1.2 billion). The print marked the fourth consecutive monthly shortfall and the largest deficit since May 2018. Consequently, the current account surplus narrowed on a 12-month rolling basis from USD 6.3 billion in February to USD 1.5 billion, the smallest in nearly one year.
The widening of the deficit year-on-year has been heavily influenced by the Covid-19 pandemic wreaking havoc on international trade and tourism, with much of Europe on lockdown in the month: Exports fell a steep 18.0% (February: +2.0% year-on-year), the largest contraction in over four years, while imports expanded 3.4% (February: +9.7% year-on-year). Meanwhile, the services trade surplus narrowed as well; tourism has been particularly hard hit by the pandemic, which has seen widespread travel restrictions put in place.
On the financial front, there was a net outflow of USD 7.7 billion, up from the USD 1.6 billion outflow recorded in the same month of the prior year (February 2020: USD 3.2 billion inflow). The outflow of capital was driven by foreign banks and foreign nationals limiting their exposure to Turkey and debt repayments by Turkish banks and firms. Moreover, the country’s already very low international reserve assets plunged by USD 16.6 billion in the month.