Turkey: Current account deficit widens on robust demand
The current account balance recorded a USD 4.2 billion deficit in February, widening from the USD 2.6 billion shortfall recorded in February 2017. The reading was smaller than the revised USD 7.0 billion (previously reported: USD 7.1 billion) deficit recorded in January and in line with market expectations. Consequently, the 12-month trailing current account deficit widened to USD 53.5 billion in February from USD 51.6 billion in January, the largest deficit in over two years.
Robust domestic demand and an increase in the goods deficit drove February’s widening in the balance of trade. Good imports soared 20.8% year-on-year in February (January: +38.6% year-on-year), with net gold imports less than in January but still strong at USD 1.0 billion in February. Total imports for the month stood at USD 18.4 billion. Merchandise exports were solid in February, expanding 9.5% in annual terms following January’s 10.5% growth. All told, the goods trade deficit widened to USD 4.4 billion in February from the USD 2.5 billion shortfall recorded in February 2017. However, the figure was well below the USD 7.6 billion deficit recorded in January.
Meanwhile, the trade surplus in the services sector improved markedly in annual terms in February, rising to USD 846 million from USD 482 million in the same month of the previous year. The increase was attributed to a net inflow of USD 835 million in the travel services sector, up substantially from the USD 569 million logged in February 2017.
The majority of February’s deficit was financed by foreign direct investment, while official reserves shrank USD 263 million. February’s balance of payments reveals the country’s precarious position of managing a rapidly depreciating lira amid investors’ fears on the economic outlook and a reliance on foreign inflows.