Turkey’s current account deficit shrinks 16% y/y in December

Turkey’s current account deficit shrinks 16% y/y in December
By bne IntelliNews February 14, 2017

Turkey’s current account deficit fell by 16% y/y to $4.2bn in December, just a touch below the market consensus forecast for a figure of $4.3bn.

The current account shortfall, the economy’s Achilles’ heel, was thus $32.6bn last year versus $32.1bn in 2015, data from the central bank showed on February 14.

The government’s current account deficit forecast for 2017 is $32bn or 4.2% of GDP.

In December, exports increased by 10% y/y to $13.5bn, while imports were up 2% y/y to $17.7bn, leading to a foreign trade gap of $4.2bn. That represents a 17% decline compared with the same month of 2015.

Tourism revenues, an important source of hard currency, rose by 1% y/y to $700mn in December, but full-year tourism revenues declined to $13.7bn from $21.3bn in 2015.

Net FDI inflows fell by 1% y/y in December to $1.54bn. In 2016, net FDI stood at $9bn, down from $12.45bn in 2015. Foreign investment inflows financed 28% of the country’s current account shortfall last year.

The central bank also reported a net portfolio inflow of $1.91bn in the month, a 95% y/y increase. There was an inflow of $118mn into the country’s equity market in December. Last year, inflows into Turkish equities amounted to $823mn vs an outflow of $2.4bn in 2015.

The domestic government debt securities market saw an outflow of $414mn in December, but inflows into the market were $823mn in 2016 overall against an outflow of $7.7bn in the previous year.

Data also showed an inflow of $1.96bn through net errors and omissions. Unregistered capital inflows that reached $11.1bn last year helped the country finance its large current account shortfall.

Turkey's Balance of Payments
($ mn) 2015 2016 y/y
CURRENT ACCOUNT -32,118 -32,605 2%
Goods, Services and Primary Income -33,548 -34,359 2%
Goods and Services -23,906 -25,350 6%
Foreign trade balance -48,114 -40,746 -15%
Exports 151,970 150,222 -1%
Imports 200,084 190,968 -5%
FINANCIAL ACCOUNT -21,941 -21,513 -2%
Net FDI -12,455 -8,998 -28%
Net acquisition of financial assets 5,095 3,118 -39%
Net incurrence of liabilities 17,550 12,116 -31%
Net Portfolio Investment 15,719 -6,404 -
Net acquisition of financial assets 6,129 1,447 -76%
Net incurrence of liabilities -9,590 7,851 -
Source: tcmb