Turkey: Higher oil prices and buoyant domestic demand push current account deficit
April 11, 2011
In February, the current account incurred a deficit of USD 6.1 billion. The result was in line with market analysts' expectations, but exceeded the USD 5.9 billion deficit recorded in January. As a result, the current account deficit over the last 12 months continues to widen to the record USD 54.8 billion in February (approximately 7.5% of GDP), from a USD 48.5 billion deficit recorded in the full year 2010 (6.6% of GDP). The rapid deterioration in the external account reflects an increasing imbalance between domestic demand and GDP growth, which has been driven by surging imports. The buoyant pace of import growth is raising concerns among Turkish monetary authorities, who have implemented a new policy mix aimed at curbing short-term capital inflows and cooling domestic credit growth. In addition, higher oil prices also contributed to the rising current account deficit, as oil imports account for nearly 20% of total Turkish imports. Therefore, imports rose 49.2% over February 2010 in USD terms, while exports added 22.1% over the same period. As a result, the trade deficit increased to USD 63.0 billion in the 12-month period to February 2011, which is a record high.