Turkey: The current account balance has a deficit of 1.87 billion USD in January

In January, the current account balance in Turkey, gave USD 1.87 billion deficit.

In January, the current account balance in Turkey, gave USD 1.87 billion deficit. Although the current account deficit figure announced on a monthly basis was realized above the market expectation of 1.55 billion USD, it was announced slightly below our expectation of 2.1 billion USD. The current account balance decreased by 166 million USD in the monthly period compared to January of the previous year. On an annualized basis, a current account deficit of 36.6 billion USD was recorded.


In 2020, while credit growth and gold imports are determinant in terms of the current account deficit, we see that the slowdown in gold imports among these items has begun. The decrease effect in tourism revenues may recover to a certain extent with a season expected to be more normal this year. In this respect, we expect the balance of services to be positively affected, especially in the period after spring. On the other hand, despite the tighter financial conditions domestically, we do not see a decisive slowdown on the domestic demand side due to the high level of imports. We can see the effect of the continuation of the domestic demand, in addition to the increase in commodity and oil prices, increasing imports on price basis. The change of 10 USD in the oil price affects the ratio of the current account deficit to the national income by half a point, and has an annual effect of around 4.4 billion USD on the current account deficit. Brent oil price, which is around 70 USD, is generally above the assumptions made in the modeling made at the beginning of the year.


While the net inflows from direct investments on the financing side were 194 million USD in January, it is seen that there was a net inflow of 4.8 billion USD on the portfolio side. Net sales were 293 million USD in stocks, while a net purchase of 924 million USD was made in debt instruments. During this period, official reserves increased by 3.57 billion USD due to the policies of the new economy management. With the effect of orthodox monetary policy, we expect the need to use reserves to finance the current account deficit to decrease in 2021. In January 2021, the current account balance had a deficit of 1.87 billion USD, while net errors and omissions or capital movements of unknown origin showed a monthly inflow of 3.8 billion USD.


In 2020, we expect growth and domestic demand dynamics and oil prices to be determinants on the current account deficit. Tourism revenues may reflect more positively this year, after the loss experienced last year. Here, too, the balance point will be lower than 2019 but above 2020. Foreign trade data for the first 2 months of the new year point to a slowdown in gold imports. The item in question was among the sections with the highest import. On the other hand, domestic demand continues, causing imports to remain somewhat high. When we include the oil price, which is the most important factor affecting our energy bill, to this, it has an increasing effect on the current account deficit on price basis. This year, we expect the current account deficit to slow down compared to the previous year, but we expect an annual realization of around USD 28 billion.


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