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May 12, 2017 www.intellinews.com I Page 9
Turkey’s current account deficit narrows 18% y/y in March
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Turkey’s current account deficit declined by 18% y/y to $3.06bn in March after expanding by 29% y/y in February, the central bank announced on May 11.
Markets expected a deficit of $3.16bn, according to a Reuters poll. The better than expected March result was mainly driven by rising exports.
Turkey’s current account deficit – traditionally the economy’s weak spot stemming from a heavy reliance on imports, especially energy – stood at $32.6bn in 2016, compared to the previous year’s $32.1bn. The government’s forecast for 2017 is $32bn, or 4.2% of GDP. The IMF expects the current account deficit to widen to 4.7% of GDP in 2017 from 3.8%
in 2016. Exports in March rose by 14% y/y to $15.4bn while imports were up 6% y/y to $18.2bn, leading to a foreign trade deficit of $2.84bn in the third month of 2017, a 22% y/y decline from a year ago.
Tourism revenues, which traditionally help the country plug its large current account deficit, were up 4% y/y to $749mn, financing 25% of the current account shortfall in March.
Also on the financing side, net foreign direct investment (FDI) inflows rose 37% y/y to $1.57bn, while net portfolio inflows declined by 20% y/y to $2.23bn in March. There was an outflow of $49mn from Turkish equities in the month, while the domestic government debt securities market saw an inflow of $1.02bn. The central bank also reported an outflow of $1.15bn through net errors and omissions.
Turkey's persistent current account deficit and its high external financing needs constrain ratings because they make economic growth vulnerable to external refinancing risks, S&P Global Ratings warned last week when it affirmed Turkey’s unsolicited 'BB/B' foreign currency long- and short-term sovereign credit ratings.