Turkey: C/A surplus announces at 3.16 billion USD in October

In October, the current account balance in Turkey gave a surplus in the third month, with the increase in exports and tourism revenues.

In October, the current account balance in Turkey gave a surplus in the third month, with the increase in exports and tourism revenues. The current account surplus, which was announced as $3.16 billion on a monthly basis, was more positive than the market expectation of $2.5 billion (Tera: $1.5 billion) and the revised September data, which was $1.67 billion more. In the monthly period, the current account balance is more positive than the 93 million USD deficit in October last year. On a 12-month basis, the current account deficit narrowed to 15.4 billion dollars from 18.4 billion dollars compared to the previous month.


Despite the bilateral risk balance on the current account balance, we think that some components of the surplus position under current economic conditions should be analyzed. While the current account balance has been positively supported by the decrease in the external deficit and the positive effect of tourism revenues for a significant part of this year, it is necessary to take into account the price factors that have increased the account expenses in the last period in terms of the following balances. The surplus in goods trade was $146 million, on a more positive level compared to the $1.29 billion deficit in October 2020. We observe that the positive course of foreign demand maintains the strong trend on the export side of goods. If commodity prices come down with some weakening in global demand, it may help maintain the overall current account balance trend. In the balance of services trade, we observe that the role of tourism and other services in improving Turkey's external balance continues, with a surplus of 3.86 billion dollars compared to 2.02 billion dollars a year ago. Foreign tourist arrivals nearly doubled year-on-year in October, reaching 3.47 million, according to data released by the Ministry of Culture and Tourism.


While net inflows originating from direct investments on the financing side were 337 million dollars in October, it is seen that there was a net outflow of 2.22 billion dollars on the portfolio side. While net sales of stocks were 55 million dollars, net sales of debt instruments were 400 million dollars. Official reserves increased by $1.48 billion. In October 2021, the current account balance gave a surplus of $3.16 billion, while capital movements classified as net errors and omissions, that is, coming from an unknown source, showed a monthly inflow of $2.65 billion. In the first 10 months of the year, inflows due to net errors and omissions amounted to 14.7 billion dollars.


We think that it is necessary to evaluate some reservation factors and the effects of policy implementations while forming expectations for the upcoming period. Factors such as the global trend in freight prices and the impact of energy prices on foreign trade, together with the decreasing contribution of service revenues, will be factors in the next period. Despite the normalization in gold imports, total goods imports are increasing due to the rise in commodity prices and the positive course of domestic demand. On the service expenses side, we see much higher than average monthly data. In this item, we will probably end the year above the targets set in the MTP. We expect the seasonally adjusted current account surplus trend since September to cease in November and return to the current account deficit position. The aforementioned variables, especially the general trend of the economy, will be decisive in the trend after December, so we still keep the 2022 expectations open-ended.


We are still not entirely sure in terms of current variables whether the current account balance is of primary importance in the context of monetary policy. Therefore, there is a high standard deviation as to how long the current account balance will be in the central bank's policies as a factor, or how long the policy ground will progress, even if this criterion is adopted. Minister of Treasury and Finance, Mr. Nureddin Nebati, shortly before taking office, In a series of tweets that support the growth-oriented low-interest economic policy that President Mr. Recep Tayyip Erdoğan wants to implement, he said that the current account deficit is the biggest problem of the economy and that rates should be lowered against supply-side inflation.


In his statement in October, Central Bank Governor Mr. Şahap Kavcıoğlu said that Turkey's 2021 current account deficit is estimated between 15 billion and 17 billion dollars. Realized data and the new economy perspective to be created show that a one-year current account deficit may be realized even below this range at the end of the year. We are revising our expectation for a cumulative current account deficit of 10 billion dollars for 2021, which will correspond to approximately 1.7% of the GDP we expect for 2021.

Kaynak Tera Yatırım-Enver Erkan 
Hibya Haber Ajansı