Turkey’s February CA deficit falls 4% y/y to more than expected $3.2bn

By bne IntelliNews April 10, 2015

Turkey’s current account deficit (CAD) fell 4.4% y/y to $3.2bn in February, above the market consensus forecast of $2.75bn, showed data of the central bank on April 10. The decline in CAD deficit was a sharp 60% in January when the shortfall amounted to $2bn. Imports declined by 7% y/y to $16.2bn, but more worryingly exports fell by 6% y/y to $13.1bn in February. 12-month rolling CAD declined to $42.82bn in the month from $42.97bn in January.

The central bank reported $973mn worth of FDI inflows into the country, down from $1.6bn of foreign direct investment inflows a year ago and January’s $1.8bn. FDI inflows financed 30% of the CAD deficit in the month. Data also showed a $479 portfolio outflows into Turkey’s financial markets vs $1.82bn inflow in the previous month, but the portfolio outflows were more than $1bn in February 2014. There was a $503mn outflow from Turkish equities vs $462mn inflows a month ago. The central bank reported $970mn outflow from government bonds that came on top of the $281mn outflow, bringing the total amount to $1.1bn in the first two months of the year, compared to January-February last year when the bond market saw an outflow of $2.2bn. Banks borrowed $1.11bn in international capital markets through bond issuances, said the central bank.

The central bank also reported $4.3bn inflows in February under the “net error and omissions” item vs $1.3bn outflows in the previous month.

As a result, the current account deficit amounted to $5.2bn in the first two months of the year, pointing to a 37.5% y/y declined.

The government expects the CAD to be $46bn (or 5.4% of GDP) this year while it forecasts the deficit to widen to $49.2bn (5.4% of GDP) next year. Economy minister, Nihat Zeybekci, however, said this week that the CAD could come in at 4% of GDP this year. Lower oil prices and weak domestic demand will probably help Turkey reduce its current account deficit, but Turkey is vulnerable to potential capital outflow shocks.

Turkey's Balance of Payments Jan-Feb    
($ mn) 2014 2015 y/y
CURRENT ACCOUNT  (8,326)  (5,201) -38%
 Goods, Services and Primary Income  (8,448)  (5,352) -37%
      foreign trade balance  (8,689)  (5,723) -34%
      exports  27,215  26,433 -3%
      imports  35,904  32,156 -10%
CAPITAL ACCOUNT  (22)  (2) -91%
FINANCIAL ACCOUNT  (3,050)  (2,265) -26%
       Net FDI  (2,180)  (2,313) 6%
       Net Portfolio Investment  1,440  (1,409) -198%
NET ERRORS AND OMISSIONS  5,298  2,938 -45%
Source: tcmb      

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