Turkey: Narrowest current account deficit in eight months in June
The current account deficit of Turkey narrowed to an eight-month low of USD 1.1 billion at the close of the second quarter, improving markedly from June 2020’s USD 3.1 billion deficit (May 2021: USD -3.2 billion). The print met market expectations. Meanwhile, the current account deficit narrowed to a 10-month low of USD 29.7 billion on a 12-month rolling basis (May: USD -31.6), supported by the global reopening and softer movement restrictions.
A smaller deficit compared to the same month a year prior came on the back of a notable services trade surplus in the month. Softer movement restrictions abroad supported the important tourism sector, with arrivals skyrocketing over a 1,000% year-on-year; the data was flattered by a supportive base effect, however. Simultaneously, the goods trade deficit narrowed to an eight-month low as goods exports growth (June: +48.6% year-on-year) outpaced merchandise imports growth (June: 39.0% yoy).
On the financial front, there was a net inflow of USD 7.0 billion in June, swinging from the net outflow of USD 5.7 billion the same month a year earlier (May 2021: USD 4.5 billion net inflow). Inflows were buoyed by the Central Bank’s larger FX swap deal with the People’s Bank of China. In addition, inflows were boosted by external debt creation by the government, banks and firms. Lastly, official reserves increased by USD 8.8 billion.
Commenting on the data, analysts at Goldman Sachs added:
“The preliminary data for the merchandise trade balance show a US$1.2bn deterioration in July. Nevertheless, we think the improvement in the services trade balance will be more than enough to offset this and the current account deficit will narrow further. We maintain our 2.2% of GDP current account deficit forecast for the whole year.”