May Current Account: ’49ers at an unexpected time and place

Turkish Economy: May Current Account

’49ers at an unexpected time and place

Turkey recorded a current account deficit of USD 5,2bn in May slightly higher than market expectations. 12 month cumulative deficit widened by USD2,1bn to USD 35,3bn.

Key Take-aways:

  • A temporary widening due to idiosyncratic gold imports. USD 2,1bn gold imports considerably higher to its long term average of USD 465mn.
  • Core goods and services balance (ex-gold and –energy) in line with historic trends.
  • Central bank reserves increased by another USD 2,4bn.
  • Deficit to shrink again with help of tourism revenues in summer months.

Gold Trade

Turkish households are notorious about their foreign exchange holdings. They tend to gauge the right timing about market reversals to switch from Liras to FX or vice versa. A similar behavior can be attributed for their gold holdings (Figure 1). Turkish households traditionally diversify among Lira deposits, FX deposits and gold in their portfolios. When gold prices hit its lowest in Lira terms gold imports rose to USD 2,1bn. Last year net gold trade recorded a surplus of USD 0,5bn. This year it turned to a deficit of USD 1,5bn causing the current account deficit to widen by USD 2,1bn.

Tourism & Outlook

Tourism revenues started to kick in. In the months of April and May number of visitors increased in double digits. Consequently tourism revenues broke the USD 1bn level. In the month of May, Turkey generated USD 1,2bn in tourism revenues matching the corresponding number of visitors (Figure 2).

Due to poor season last year tourism income fell to USD 6bn total in the summer months. In a given year that figure should have been measured at about USD 9 – 10bn. Therefore 12 month cumulative deficit has a chance to shrink again in summer months.

As early as in June a reversal may appear starting to correct this month’s widening. Ministry of Customs have already announced preliminary trade statistics for June. Announced deficit of about USD 6,2bn means an improvement compared to last year’s USD 6,6bn. On top of it tourism income may improve in the range of USD 0,5bn to USD 1bn.


Turkey continues to finance its deficit by longer term FDI. Portfolio flows contribute in the short term lessening the need for foreign loans, a source of external fragility (Figure 3).

12 month cumulative FDI have reached USD 7,8bn, preserving its upward trend that started eight months ago.

Portfolio flows have increased markedly with Borsa Istanbul benchmark indices hovering at all-time highs and on the back of Treasury’s heavy issuance. 12 month cumulative bond and stock inflows have reached USD 13bn accelerating by about USD 4,5bn. 

Issuance of a USD 1,75bn EuroBond contributed significantly to the total investment of USD 5,4bn in Turkish fixed income securities in May.

In line with healthy long-term trends, credit related foreign financing continued to decrease in May. Banks have paid-off USD 3,2bn in foreign loans while real sector’s foreign financing has slowed down to USD 4,8bn.