Turkey’s current account (CA) deficit widened 23.5% y/y to USD 3.28bn in September, well above the market consensus forecast of USD 2.7bn. The CA shortfall was USD 2.43bn a month ago.

In January-September, the country’s CA deficit rose to USD 49bn from USD 38.4bn in the same period of 2012.

Foreign trade balance posted a deficit of USD 5.99bn in September, a 10.7% y/y increase, data of the Central Bank showed on Wednesday. This was also higher than the USD 5.7bn of foreign trade deficit the Central Bank reported in August. Exports rose 1.2% y/y in September but the rise in imports was a higher 3.9% y/y. Imports actually fell nearly 3% y/y in August. Import figures reflect recovery in domestic demand and depreciation of TRY.

On the financing side: Net FDI inflows rose 4% y/y to USD 596mn, covering only 18% of September’s CA deficit. Turkey attracted USD 540mn of net FDI in August. Portfolio inflows, which stood at USD 1.93bn in August, fell 54.1% y/y to USD 2.2bn. Inflows in to Turkish equities stood at USD 733mn, comparing favourably with the outflows of USD 258mn in August and USD 605mn in July. Investors bought USD 1.17bn worth of government securities. Turkey finances its wide CA deficit mainly through capital inflows and U.S Federal Reserve’s expected tapering of asset purchases makes it vulnerable to any reversal of capital inflows.

Inflows through net errors & emission declined to USD 1.72bn from the previous month’s USD 3.1bn. Net error & emission inflows amounted to USD 5.11bn in the first nine months of the year versus USD 4.57bn in the same period of 2012.

The Turkish government expects the current account deficit to be USD 58.8bn (7.1% of GDP) and it forecasts a CA shortfall of USD 55.5bn (6.4% of GDP) next year.