Current Account in Turkey
Turkey - Current Account
Current account deficit greater than anticipated in June
Turkey recorded a USD 0.6 billion current account deficit in June (May: USD +0.3 billion) that overshot market expectations of a USD 0.3 billion deficit, closing the second quarter on a slightly sour note; however, the figure was a stark improvement from the USD 3.0 billion shortfall that was recorded in June 2018.
On the other hand, on a 12-month rolling basis, the current account balance registered a USD 0.5 billion surplus, eking out its first surplus in nearly 17 years and contrasting May’s USD 1.9 billion shortfall. In the wake of last year’s currency crisis and ongoing economic hardship, limp domestic demand has been a key element in the recovery of external imbalances. However, Muhammet Mercan, chief economist at ING Turkey, noted that “the improvement in the current account deficit is about to end in the second half given the likely recovery in the credit impulse with new credit guarantee fund package and ongoing rate cut cycle.”
May’s improvement came on the back of a narrowing merchandise trade deficit in annual terms and a widening services trade surplus owing to tourism sector benefiting from the weak lira. The improvement in the trade balance mainly reflects imports continuing to drop at staggering rate due to currency weakness and frail domestic demand, especially considering that exports dropped at a steep rate in June as well. Imports fell 19.4% over the same month a year prior, the strongest contraction since January this year, while exports fell 12.3%, the first decrease since December last year.
On the financing front, a net inflow of 0.9 billion was recorded in June (May: USD +1.1 billion), contrasting the USD 4.9 billion net outflow in June last year. The net inflow in June was driven by a drop in foreign currency and deposit assets of banks held abroad while non-residents’ holdings at Turkish banks rose. However, net inflows were limited due to reduced portfolio investments as well as bond and debt repayments.
Meanwhile, the Central Bank’s foreign exchange reserves fell USD 2.5 billion in June following a USD 3.0 billion increase in May, but significantly less than the USD 7.0 billion drop in reserves in June 2018.
Turkey is expected to record a current account deficit of 0.9% of GDP in 2019, according to FocusEconomics Consensus Forecast panelists; this would be the smallest deficit in over a decade and largely thanks to a weak lira depressing domestic demand and supporting exports and tourist arrivals. Next year, FocusEconomics panelists see the current account deficit widening to 2.0% of GDP.
Turkey - Current Account Data
|Current Account (% of GDP)||-6.7||-4.7||-3.7||-3.8||-5.6|
5 years of economic forecasts for more than 30 economic indicators.
Turkey Current Account Chart
Source: Central Bank and FocusEconomics calculations.
|Bond Yield||14.86||-0.09 %||Sep 04|
|Exchange Rate||5.67||-0.85 %||Sep 04|
|Stock Market||100,077||1.41 %||Sep 04|
Get a sample report showing our regional, country and commodities data and analysis.
Request a Trial
Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.
September 3, 2019
Consumer prices rose 0.86% in August compared to the previous month, down from July’s 1.36% increase.
September 2, 2019
Operating conditions in the Turkish manufacturing sector deteriorated at a less severe pace in August than in July, with the Istanbul Chamber of Industry and IHS Markit’s manufacturing Purchasing Managers’ Index (PMI) rising to 48.0 from 46.7.
August 26, 2019
The business confidence index recovered in August, rising to 102.5 from 98.3 in July.
Turkey: Consumer confidence improves marginally in August, but remains mired in pessimistic territory
August 22, 2019
Sentiment among Turkish consumers improved slightly in August after dropping to a near-record low in July, with the consumer confidence index rising to 58.3 in August from 56.5.
August 16, 2019
Turkish industrial production fell 3.9% year-on-year in June, down from May’s 1.3% fall.