Turkey’s deficit saved by record gold imports

According to the Central Bank of Turkey’s announcement on Wednesday, the deficit in the current account balance (CAD) was $27.2 billion in the first eight months of the year. The CAD was realized as $22.8 billion in the same period of last year. The eightmonth CAD is up 19% by $4.4 billion, but there is a reason for this increase.

Turkey has broken a record in terms of gold imports this year. In the first eight months of the year, gold worth $11.8 billion was imported. The gold exports in this period amounted to $5.5 billion and thus the deficit in the gold trade was $6.4 billion. However, in the same period last year, gold trade didn’t run a deficit but a surplus. In the January-August period of last year, we imported $3 billion of gold and exported $6.3 billion to generate a surplus of more than $3.3 billion. It was also inevitable that the CAD would grow when the $3.3 billion gold surplus became a deficit larger than $6.4 billion.

If not for gold ...

The ratio of the CAD to GDP is also included in medium-term programs, with some figures including and others excluding gold trade. In other words, it is important to understand how the current account is influenced by the gold trade. We also want to look at the impact of gold exports and imports on the current account balance in numerical terms for the first eight months. We mentioned the realized first eight-month current account balance. The deficit, which was $22.9 billion last year, rose to $27.2 billion this year. But if gold trade was excluded, what kind of picture would we be facing?

Since the gold trade in the first eight months of last year ran a surplus, it made more impact on the CAD. Thus, excluding gold, the CAD for the last year would be $26.2 billion in eight months. This year is the opposite. We ran a deficit of $6.4 billion in gold trade in the first eight months. Therefore, when the net CAD of $6.4 billion is deducted from the CAD of $27.2 billion in this period, the CAD, excluding gold, declines to $20.9 billion. Consequently, there is a decline rather than a rise in the CAD – from $26.2 billion to $20.9 billion in the first eight months of 2017 – when gold trade is excluded.