Turkey: Current account surplus narrows in October on the back of strong import growth
The Turkish current account surplus narrowed in October to USD 1.6 billion from USD 2.4 billion in September and a USD 2.6 billion surplus in October 2018; the narrowing of the current account surplus was widely expected by market analysts. On a 12-month rolling basis, meanwhile, the current account surplus came in at USD 4.3 billion, which stands in stark contrast to the USD 38.9 billion deficit recorded in the 12 months up to October 2018. On the other hand, the rolling sum of the current account surplus fell from a revised USD 5.4 billion surplus in September (previously reported: USD 5.9 billion).
October’s print reflected a deficit in merchandise trade, as the services trade surplus widened in October. The deficit in merchandise trade came on the back of resurgent imports, which grew at an 18-month quick pace of 11.3% year-on-year; however, this is largely due to a base effect as imports nosedived 23.9% in the same month a year earlier owing to the currency crisis. Nonetheless, the trade balance was also affected by softening growth in exports, which expanded 1.3% year-on-year in October compared to a 2.6% increase in September. The widening of the services trade surplus, meanwhile, likely benefited from a still weak, albeit relatively stable, Turkish lira buttressing the tourism sector as evidenced in greater services exports.
On the financial front, there was a small net outflow of USD 131 million in November (September: USD -507 million), up from the USD 181 million net outflow in the same month last year. Outflows were driven by the repayment of bank and government debt as well as equity outflows. On the other hand, inflows of currency and deposits strengthened. Meanwhile, official reserves increased by USD 1.9 billion in November.