Turkey: Current account deficit widens in June
The current account deficit widened to USD 2.9 billion in June 2020 from USD 0.1 billion in June 2019 (May 2020: USD -3.8 billion). Consequently, Turkey recorded the seventh consecutive monthly shortfall, highlighting the deteriorating state of the external sector at the hand of Covid-19 and associated containment measures. Moreover, in the 12 months up to June, the current account balance fell to a USD 11.1 billion shortfall, down from May’s USD 8.3 billion deficit: June’s print marked the largest deficit since January 2019.
The deterioration in the current account compared to the same month a year prior came on the back of a widening of the services trade deficit, while the merchandise trade balance remained in deficit as well. The former has been hard hit by global containment measures, which weighed heavily on tourism as arrivals were down by over 95% year-on-year in the month. Meanwhile, the merchandise trade deficit eased slightly from a year earlier as exports (June: +10.9% year-on-year; May: -43.5% yoy) outpaced imports (June: +6.8% yoy; May: -28.9% yoy) amid weakened domestic demand and lira weakness.
On the financial front, there was a net outflow of USD 6.8 billion, swinging from the USD 0.4 billion net inflows in the same month a year previous (May 2020: USD 7.3 billion net inflow). June’s result reflected a USD 2.0 billion Eurobond payment; private-sector loan payments; and notable currency and deposit outflows from banks as they increased their assets and deposits abroad. Lastly, official reserves decreased by USD 7.7 billion in June, in part due to financing needs resulting from the current account deficit and the Central Bank’s FX intervention to protect the lira from sliding.