Turkey: Current account swings into deficit amid nosediving exports
Turkey’s current account deficit swung from a USD 1.1 billion surplus in May 2019 to a USD 3.8 billion deficit in May 2020 (April: USD -5.1 billion). The print marked the sixth consecutive monthly shortfall and highlighted the deteriorating state of the external sector at the hands of Covid-19 and associated containment measures. Moreover, in the 12 months up to May, the current account balance recorded a USD 8.2 billion shortfall, down from April’s USD 3.3 deficit and the largest gap since February 2019.
The swing in the current account balance compared to the same month a year prior came on the back of a significant widening of the merchandise trade balance as well as a services trade deficit, with the latter due to global containment measures weighing heavily on tourism as foreign arrivals were virtually non-existent in the month. Meanwhile, merchandise exports plummeted 43.5% year-on-year (April: -42.4% year-on-year) and imports dropped 28.9% year-on-year (April: -25.0% yoy).
On the financial front, there was a net inflow of USD 7.3 billion, up from the USD 1.2 billion net inflow in the same month a year earlier and swinging from the USD 2.6 billion net outflow recorded in April 2020. May’s inflow came on the back of the currency swap deal with the Central Bank of Qatar as well as greater currency and deposit holdings with domestic banks by residents and nonresidents.