Turkish current account in surplus as demand falls

Turkey’s current account registered a surplus of $2.77bn in October, the third monthly surplus after years of deficit, central bank data showed yesterday, as a currency crisis drove up the cost of imports and weakened domestic demand.

Along with persistent double-digit inflation, Turkey’s current account deficit — which was $27.17bn in January-October — has been a longterm source of concern for investors. It means Turkey relies on speculative foreign inflows to plug the shortfall. The recent surpluses highlight the extent of the slowdown in Turkish domestic demand — as well as the higher prices of imports — after the lira fell more than 40% against the dollar. The economy grew by a smallerthan-expected 1.6% in the third quarter, data showed on Monday. “The reason for a current account surplus in the last three months is slowdown in domestic demand. We expect the November current account balance to record a surplus, although to a lesser extent,” said Gulay Elif Yildirim, chief economist at Sekerbank. “Preliminary indicators and current account balance data show that the decline in growth will continue in the fourth quarter.” According to a Reuters poll of 16 economists, the current account data had been expected to show a surplus of $2.55bn in October, up from last month’s surplus of $1.83bn. Apart from two months in 2015, the current account was in deficit every month from October 2009.

The lira, which has weakened around 30% against the dollar this year, stood at 5.3850, weakening some 1% from a close of 5.3270 on Monday. The current account deficit in October 2017 was $3.84bn.

The goods surplus rose to $799mn in October, versus a deficit of $5.64bn compared with the same period a year earlier.

The Reuters poll showed the current account is expected to record an overall deficit of $29.5bn in 2018, down from the $33bn deficit forecast in a previous Reuters poll.