CAD/GDP at 6.4 percent

Dünya Executive - - COMMENTARY -

According to data released by the Central Bank, the current account deficit reached $57.1 billion at the end of April. That is the highest deficit ratio since March 2014 when the deficit was $58.4 billion.

Nominally, we did break a record but there are some other records ahead of us. At the end of March, GDP reached TRY 3.2 trillion at current prices. The dollar rate was 3.67 lira – the average rate between April 2017-March 2018. No doubt this figure will also go up during 2018.

When we convert TRY 3.2 tril- lion of GDP to foreign exchange at a rate of 3.67, we get an eco- nomic size of $885 billion. By the end of March, the CAD/GDP rate reached 6.3 percent. By the end of April, another $57.1 bil- lion of CAD increased the ratio to 6.4 percent.

Let us underline a fact once again: This rate is calculat- ed with a very low dollar rate. In March, the average dollar rate was 3.67 lira. But the average rate has soared to 4.02 lira now. This rate shouldn’t be underestim­ated as the rate reached 4.90 and has now declined to 4.50. The first three months’ average dollar rate was well below 4.0 percent. But it is a fact that this figure will increase.

The CAD to GDP rate reached 6.4 percent at the end of April. And we all know what happened after April. GDP realized at higher nominal levels but the dollar rate soared faster. So GDP will be lower when calculated in dollars and the CAD will increase too. The CAD to GDP rate is one of the most significan­t economic indicators. The average dollar rate will increase so we may see this rate increasing to 7 or 8 percent. In other words, instead of complainin­g about credit rating cuts or asking why non-residents don’t bring capital, we should just look at these figures to understand.

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