Turkey’s December current account deficit narrows 18.4% y/y to $6.8bn

By bne IntelliNews February 11, 2015

Turkey’s current account deficit narrowed 18.4% y/y to $6.82bn (market consensus forecast: $6.7bn) as foreign trade deficit shrank 15% y/y, data of the Central Bank showed on February 11. In 2014, the current account deficit stood at $45.84bn, down from $64.66bn of deficit in 2013. Note that the decline in the current account deficit was 37% y/y in November 2014 when the shortfall was $5.7bn.

Exports rose only 0.5% y/y in December while the decline in imports was a sharper 5.1%. Turkey’s foreign trade deficit fell 20.4% in 2014 compared to 2013, amounting to $63.59bn.

The Central Bank reported $912mn of net foreign direct investments for December while net foreign direct investment inflow into the country amounted to $5.48bn in the whole of 2014, financing only 12% of the current account deficit, versus $8.83bn a year ago. Portfolio investment inflows stood at $1.22bn in December alone, and at $19.99bn in the full year versus $23.99bn of portfolio inflows in 2013. Data showed $4mn outflow from Turkish equities in December after an inflow of $524mn in November while non-residents’ net purchases of equities amounted to $2.56bn in 2014 against $842mn in 2013. The Central Bank also reported $286mn of inflow into government debt securities in December that came on top of the $945mn of inflow in the previous month. Non-resident’ net purchases of government debt securities amounted to $370mn in the whole of 2014 versus $4.1bn in 2013.

On a net basis, banks and other sectors borrowed $10.2bn and $3.18bn, respectively, in international markets through bond issue in 2014 versus $8.05bn and $3.44bn, respectively, in 2013, said the Central Bank.

The government forecasted a current account deficit of $46bn or 5.7% of GDP for 2014 and its deficit forecast for 2015 is another $46bn or 5.4% of Turkey’s national income. Economists, however, anticipate a current account shortfall of $35.7bn at the end of 2015 as they expect the decline in oil prices to help Turkey reduce its deficit, a recent Reuters poll showed. But the depreciation of TRY, nearly 7% this year already, cause some concern. TRY has been under pressure due to expectations that the U.S Federal Reserve will raise rates this year and also due in part to continuing political pressure on the Central Bank to cut interest rates.

Turkey's Balance of Payments
(USD bn) 2013 2014 y/y
CURRENT ACCOUNT -64.7 -45.8 -29%
      exports 161.8 169.0 4%
      imports 241.7 232.6 -4%
      foreign trade balance -79.9 -63.6 -20%
CAPITAL ACCOUNT -0.096 -0.066 -31%
FINANCIAL ACCOUNT -62.0 -43.658 -30%
       Net FDI -8.83 -5.483 -38%
       Net Portfolio Investment -24.0 -20.0 -17%
Source: tcmb      

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