Turkey’s current account becomes in deficit in November but …

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Despite higher energy bills, the current account deficit continued to narrow year-over-year amid robust exports, squeezing gold imports and a recovery in the services balance

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The current account balance, which had recorded large surpluses in the previous three months, turned into a deficit of -2.7 billion dollars in November, but the deficit narrowed on a rolling 12-month basis, to 14 , $ 3 billion (which translates to around 1.8% of GDP), a trend that has continued since early 2021. A quick glance at the data for November indicates a relatively strong recovery in the balance of services (thanks to higher revenues from transport and tourism) and a narrower deficit in goods (thanks mainly to relatively strong exports despite a higher energy bill).

Breakdown of the current account (US $ bn, on a monthly basis)

CBT, ING

The capital and financial account, on the other hand, was barely positive at US $ 1.1 billion, mainly due to capital outflows from residents. Including net errors and omissions larger at US $ 4.5 billion, monthly c / y deficit and capital account entries, official reserves increased by US $ 2.8 billion.

In the breakdown of monthly flows, we noted the continued acquisition of assets by residents amounting to US $ 3.0 billion, driven by trade credits extended to foreign counterparts. For non-residents, inflows of US $ 4.1 billion were due to i) trade credits of US $ 3.0 billion, ii) deposits of US $ 1.3 billion placed by foreign investors in Turkish banks iii) gross FDI of US $ 0.9 billion iv) inflows of US $ 0.9 billion in Turkish stocks. On the other hand, a repayment of $ 1.4 billion Eurobonds by the Treasury limited foreign inflows.

We saw a strong refinancing rate for long-term corporate debt at 108% (vs. 127% on a rolling 12M basis), while the same ratio for banks stood at 102% (91% on a rolling base of 12 M) with a net amount of 0.3 USD. billion in repayments.

Breakdown of the capital account (US $ bn, on a monthly basis)

CBT, ING

The current account deficit has continued to narrow in recent months from its cyclical low in February, to US $ 36.9 billion, mainly on the strength of exports, the contraction of gold imports and the continued decline. the recovery of tourism receipts, despite the increase in the energy deficit. Given the exchange rate adjustment, with repercussions on domestic demand and imports, the current account is expected to stay on this track over the coming period, also supported by higher tourism receipts despite imports from energy reaching record levels. On the financing side, the significant use of net errors and omissions and the weakening of recorded flows show growing challenges which will probably continue this year with an increased emphasis on renewals.

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