Turkish Economy: March Current Account

Turkish Economy: March Current Account

Extent of improvement depends on tourism

Turkey recorded a current account deficit of USD 3bn in March slightly better than market expectations. 12 month cumulative deficit improved by USD0,6bn to USD 33bn.

In quarterly terms the deficit stands at USD 8,3bn – about USD 0,4bn wider compared to last year. Factoring in the GDP growth Current Account Deficit to GDP ratio stays flat at about 3,8%.

Key Take-aways:

  • External balance, one of stronger pillars this year.
  • Expect cumulative deficit to stay flat at about USD 33bn throughout 2017 in seasonally adjusted terms with a potential to improve depending on tourism revenues.
  • Financing continues at a healthy pace with a balanced composition.

 

Trade & Services Balance

​​​​​Turkey’s external balance strengthens on the back of some developments despite higher oil and commodity prices:

1. Fiscal measures targeting imports i.e. car taxation policies (Figure 1), 
2. Currency depreciation caused consumers to prefer domestic products curbing imports, and 
3. Better global trade volumes keeping exports steady.

 

Current account follows a very regular seasonal pattern. 3-month moving averages show that the deficit trails last year’s path where it has the potential to even improve in summer months depending on how well tourism may recover (Figure 2).

We expect cumulative deficit to stay flat at about USD 33bn in seasonally adjusted terms. Because in winter times monthly deficit will widen again.

Financing

 

Turkey continues to finance its deficit by longer term FDI and credit flows while portfolio flows contribute in the short term. No issues seems in meeting about USD 180bn Gross Annual Financing Requirement which is mostly a roll-over issue. Due to cost concerns banks prefer keeping the roll-over ratios slightly below 100% while the real sector continues obtaining new credit (Figure 3)