Turkey: C/A turns into deficit with weakening trade and tourism

The current account balance in Turkey posted a deficit in November due to the lack of a significant increase in tourism revenues and the widening deficit in goods trade.

The current account balance in Turkey posted a deficit in November due to the lack of a significant increase in tourism revenues and the widening deficit in goods trade. The current account deficit, which was announced as $2.68 billion on a monthly basis, was in line with the market expectation of $2.5 billion deficit, and was more negative than the revised October data, which was $3.14 billion. In the monthly period, the current account balance is more positive compared to the 3.55 billion USD deficit in November last year. On a 12-month basis, the current account deficit narrowed to 14.3 billion dollars from 15.4 billion dollars compared to the previous month.


Turkey had a surplus for three months until November due to the improvement in the trade and services balance. When we look at the most determining factors in the current account; Net goods trade posted a deficit of $3.48 billion compared to a $3.86 billion deficit in November 2020 and a surplus of $82 million in October 2021. The trade deficit widened, in part due to increased energy imports. On the foreign trade deficit side, although exports remained well and created a strong momentum due to the strong course of foreign demand throughout the year, we became disadvantaged on the import side. Although consumption-based imports decreased due to domestic demand conditions, gold imports decreased due to the absence of extra conditions last year; The energy bill has increased due to exchange rate movements and global commodity prices. We naturally experience the effect here on an amount basis, not on a unit basis. With the end of the travel season, the balance of services trade gave a surplus of 1.92 billion dollars, as tourism revenues decreased compared to the previous month. Turkey hosted 1.76 million tourists from abroad in November, below the 3.66 million average of the previous three months. Until the tourism season, we will see the decreasing effect in the current account in the off-season. On the other hand, the concerns arising from the Omicron variant remain minimal and if it does not cause travel bans, positive contributions can be made next year compared to the regular season.


On the financing side, net inflows originating from direct investments were 359 million dollars in November, while on the portfolio side, there was a net outflow of 1.45 billion dollars due to the significant deterioration in the risk appetite of investors and lack of return. While net purchases of stocks were 938 million dollars, net sales of debt instruments were 17 million dollars. Official reserves increased by $2.83 billion. In the period of November 2021, the current account balance gave a deficit of 2.68 billion dollars, while capital movements classified as net errors and omissions, that is, coming from an unknown source, showed a monthly inflow of 4.46 billion dollars. In the first 11 months of the year, inflows due to net errors and omissions amounted to $19.7 billion.


In the coming period, the current account balance will be in a central position within the framework of the new economy perspective. The central bank estimates that Turkey will run a current account surplus in 2022 "due to the strengthening trend in exports". On the foreign trade deficit side, we expect the exchange rate effect to come to the fore on a local basis in crude oil, energy group and raw material prices. The cost effect in terms of production input and energy will be at the forefront on the import side. On the other hand, we will look at the risks arising from the Omicron variant in terms of exports and foreign demand in Europe. Europe covers almost 40% of our exports, so it will be necessary to monitor the risks regarding the economic outlook in terms of foreign demand. We would like to point out the effects of the loose view of monetary and fiscal policies on the volatility of exchange rates in growth-oriented economic practices. At the same time, the weakness of the lira increases import-based input and consumption costs rather than creating an increase in exports. Therefore, we think that the sharp depreciation in the lira, together with the rise in energy costs, may pose adverse risks to the current account balance.


Within the framework of the last current account balance realization and foreign trade realizations in December, we think that the year may end with a current account deficit of around 16 billion dollars and a current account deficit/GDP ratio of 2.1%. In terms of GDP growth, we foresee 10.8% in 2021 and 4.1% in 2022.

Kaynak Tera Yatırım
Hibya Haber Ajansı