Turkey: Current account falls back into deficit in November
The current account balance of Turkey swung from a USD 1.0 billion surplus in November 2018 to a USD 0.5 billion deficit in November (October: USD +1.6 billion), which marked the first result in the red in five months. On a 12-month rolling basis, meanwhile, the current account surplus narrowed from USD 4.3 billion in October to USD 2.7 billion, marking the second consecutive month in which the rolling surplus narrowed.
The deficit in November came on the back of a greater merchandise trade deficit and a smaller services trade surplus amid a strong moderation in services exports. The increased shortfall in merchandise trade came chiefly on the back of a resurgence in imports, which grew 10.5% year-on-year (November 2018: -21.2% year-on-year). Domestic demand is seemingly slowly getting back on its feet after having been down for the count in the wake of the 2018 currency crisis. Simultaneously, export growth slowed for the third month running (November: +0.7% yoy; November 2018: +6.7% yoy) and further weighed on the trade balance.
Meanwhile on the financial front there was a strong inflow of USD 3.1 billion (October: USD -0.1 billion), driven by reduced acquisition of foreign assets by Turks, robust foreign direct investment, foreign inflows of currency deposits at local banks, foreign debt issued by non-financial firms and the government’s bond issuance.
Looking ahead, while the current account is expected to have recorded a small surplus last year, it is widely expected to return to deficit this year and thereafter owing to resurrecting domestic demand lifting import growth and thereby widening the trade deficit.