Turkey: Current account posts larger deficit in December
The current account posted a USD 5.9 billion deficit in December, deteriorating from the USD 4.0 billion deficit clocked in November (December 2021: USD 3.2 billion deficit). Meanwhile, in the 12 months leading up to December, the current account posted a USD 48.8 billion deficit, compared to the USD 46.0 billion deficit clocked in November.
A wider goods trade deficit caused the annual deterioration in December: The merchandise trade balance worsened from the same month a year prior, recording a USD 8.1 billion deficit in December (December 2021: USD 5.0 billion deficit; November 2022: USD 7.2 billion deficit). Merchandise exports increased 2.1% in annual terms in December (November: +0.2% year-on-year). Meanwhile, merchandise imports soared 12.8% annually in December (November: +14.2% yoy), marking the lowest reading since October 2021. On the flip side, a resilient tourism sector improved the services trade balance from a USD 2.3 billion surplus in December 2021 to a USD 2.5 billion surplus in December 2022. Notably, the ever-increasing energy import bill remained the key drag on the country’s external position; the current account, excluding energy, posted a USD 910 million surplus in December, down from November’s USD 2.5 billion surplus.
On the financial front, there was a net inflow of USD 7.9 billion in December (December 2021: USD 39 million outflow; November 2022: USD 6.3 billion inflow).
The current account will remain under pressure this year. A volatile political and monetary environment should discourage foreign capital flows. Moreover, the import bill will remain high as the lira weakens further. That said, our panelists see the deficit narrowing as commodity prices ease.
Muhammet Mercan, chief economist at ING, commented on the outlook:
“The current account deficit will likely remain elevated in the near term given the marked deterioration in the terms of trade, an accommodative policy stance and a weakening global growth outlook.”