Turkey: Current account gap narrows in June
August 11, 2017
The current account balance recorded a USD 3.8 billion deficit in June, narrowing the gap from June 2016’s USD 5.0 billion shortfall. The result was slightly below market expectations of a USD 3.9 billion shortfall and followed May’s USD 5.4 billion deficit, the largest since December 2014. The 12-month trailing current account deficit narrowed from USD 35.5 billion in May to USD 34.3 billion in June.
The smaller deficit in June was a result of an increase in merchandise and services exports, as a result of growing demand in Europe, as well as greater price competitiveness linked to a weakened, albeit stable, Turkish lira. Export growth expanded 2.6% over the same month last year. Imports contracted 1.7% year-on-year in June, which also contributed to the shrinking of the deficit.
A revival in the tourism sector, which picked back up following Russia’s removal of its travel ban last year and an improvement in security conditions, has also positively impacted the external balance by widening the surplus in the services account, particularly for travel. However, the continued strengthening of domestic demand could impede the current account balance from improving in the near future.
Author: Lindsey Ice, Economist