Turkey’s current account deficit narrowed 33% y/y to $2.86bn in May, data from the central bank released on July 14 showed. The shortfall, however was larger than the market consensus forecast for a deficit of $2.7bn in a Bloomberg survey but smaller than April's gap of $2.96bn. 

The deficit declined for the 10th straight month in May with the improvement once again driven by lower energy costs. Moreover, exports rose sharply supported by over a 10-fold increase in gold shipments. Analysts, however, warn gold exports tend to be volatile so the improvement may not last “These gold shipments tend to be volatile, which suggests that the recent pace of improvement in the current account balance may not be sustained,” Capital Economics suggests in a note.

In the first five months of the year, Turkey's current account gap shrank 27% y/y to $13.7bn, while the 12-month accumulative deficit declined to $27.2bn in May from $28.7bn in the previous month.

Data from the central bank showed exports increased 8% y/y to $12.8bn in May, while imports fell 4% y/y to $16.6bn, resulting in a foreign trade gap of $3.8bn, a 31% decline from a year ago.

On the financing side; clearly tourism is not helping at all. Net tourism revenues plunged by 31% to $1.2bn. Turkey’s rapprochement with Russia will bear its fruits only in a longer term as domestic security risks continue to keep foreign holidaymakers away from the country. Net foreign direct investment inflows registered a 37% y/y decline, falling to $587mn in May and net portfolio investment inflows amounted to $947mn.

In the first five months of the year, Turkey attracted $7.3bn worth of portfolio investments versus an outflow of $3.2bn a year ago. Foreign investors pulled out $838mn from the country’s equities market but the central bank reported an inflow of $230mn into government bonds in the month. Net error and omission item recorded an inflow of $1.9bn to follow an outflow of $1.4bn in the previous month.

A recent survey showed that economists expect the current account deficit to be $34.3bn at the end of the year, well above the government’s target of $28.6bn (or 3.9% of GDP). Last year Turkey’s current account gap stood at $32.2bn. 

Turkey's Balance of Payments
	2015	2016
(Million US Dollars)	Jan.-May	Jan.-May
CURRENT ACCOUNT	-18,668	-13,679
Exports	64,589	61,946
Imports	85,109	76,914
Balance on Goods	-20,520	-14,968
CAPITAL ACCOUNT	-1	15
FINANCIAL ACCOUNT	-5,201	-15,823
Direct Investment: Net acquisition of financial assets	1,381	1,248
Direct Investment: Net incurrence of liabilities	6,040	3,533
Portfolio Investment: Net acquisition of financial assets	2,287	568
Portfolio Invesment: Net incurrence of liabilities	-875	7,897
Equity Securities	-68	841
Debt Securities	-807	7,056
Other Investment: Net acquisition of financial assets	8,717	4,902
Central Bank	0	0
General Government	0	-121
Banks	10,087	5,827
Other Sectors	-1,370	-804
Other Investment: Net incurrence of liabilities	12,421	11,111
Central Bank	-109	-117
General Government	-563	-748
Banks	12,042	5,077
Other Sectors	1,051	6,899
Current, Capital and Financial Accounts	-13,468	2,159
NET ERRORS AND OMISSIONS	9,703	2,622
Source: Central Bank of Turkey