A surplus mirage
Turkey posted a record-breaking surplus in its current account for
August. But it won’t last
In August, a record was broken in the current account balance: a whopping $2.592 billion surplus, the highest in the history of the Republic. Thanks to this surplus, the deficit in the first seven months this year decreased from $33.2 billion to $ 30.6 billion. The annual deficit, which was $54.6 billion as of end July, fell to $51.1 billion at the end of August. This is a very good indicator for the economy. But only if it continues. Will it?
There may also be a current balance surplus in September, but not as much as August. Still, the surplus will not be permanent; it cannot be. No one expects it in the medium term, let alone the long run.
Reasons for the surplus
First, it is worth remembering the main items that make up the current account balance. The biggest is foreign trade. Travel, transportation, interest and profit transfers are the main items that follow.
The biggest trauma we experienced in August was the increase in the exchange rate. The average dollar rate was 4.75 in July but in August, increased to 5.73, a 21 percent spike. This naturally resulted in a rapid decline in imports. August imports were down 23 percent compared to last year. In addition to the exchange rate increase, the slowdown in economic activity negatively impacted imports. Exports didn’t help: the the exchange rate increase in August did not increase exports - which actually fell by 6 percent compared to last year. In the end, we came out with a foreign trade deficit decrease of 59 percent to $2.4 billion from $5.9 billion.
The scope of external trade data in balance of payments is different. The foreign trade deficit in the balance of payments declined by 70 percent, from $ 4.3 billion in August last year to $1.3 billion. That is, the foreign trade deficit within the balance of payments was $3 billion less compared to last year.
In other words, if the foreign trade deficit remained at last year’s level, there would not be a surplus in the current account. And the fact that exports did not increase means the main factors behind the current balance surplus were the sharp decline in imports and the slowdown in the economy.
The effect of tour sm
It is a well-known fact that this year tourism is very good. The net foreign exchange inflow, which was defined as travel in the balance of payments but covers almost all tourism revenues, amounted to $3.7 billion in August. Tourism received a net income of $3.2 billion in August last year.
W ll t cont nue?
The average of the dollar, which was 5.73 in August, increased to 6.37 in September, an 11 percent increase. The 6.37 average in September was a record high. Therefore, it is probable that imports were low in September as well. In September last year, imports amounted to about $20 billion, exports to $12 billion. Such a deficit - $8 billion - is not in the cards this year. However, a low deficit comparable to August is not expected. In September, tourism income will start to decrease seasonally. When we combine all these factors, we can anticipate a lower current surplus or a small current deficit in September.