Turkey’s net international investment gap, the difference between its assets and liabilities, sharply contracted by 7% m/m to $401bn at the end of May, the lowest level recorded since Q1 2017, from $433bn at end-April, the central bank said on July 18.
The gap expanded by a sharp 24% y/y to a record high of $459bn at the end of 2017 from $369bn at end-2016 but it fell by 3% q/q to $447bn at end-Q1.
The country’s external assets declined by 1% m/m to $232bn at end-May while external liabilities fell more acutely, moving down by 5% m/m to $633bn.
Under the main liabilities group, direct investments – equity capital plus other capital – declined by 12% m/m to $140bn at the end of May, while portfolio investments fell by 6% m/m to $161bn.
Non-residents’ equity holdings decreased by 12% m/m to $39bn, while their holdings of government domestic debt securities fell by 17% to $25bn.
Turkey is heavily dependent on external borrowing due to its chronic current account deficit. Debt-financed consumption has been the prime feature of the country’s remarkable economic growth achieved during much of the past decade.