Central Bank governor stresses narrowing current account gap

ANKARA

Turkish Central Bank Governor Şahap Kavcıoğlu on Oct. 27 underlined the importance of turning the current account deficit to the positive territory by ramping up credits to exporters.

“The improvement in annualized current account is expected to continue in the rest of the year due to the strong upward trend in exports,” he told reporters and economists at a meeting held to release the bank’s fourth quarterly inflation report.

“The strengthening of this trend is important for the price stability objective,” he added.

Kavcıoğlu said that the Central Bank’s international reserves increased to $126 billion as of Oct. 15.

“We are aiming to continue increasing reserves in order to strengthen the transmission mechanism of the monetary policy,” said the Central Bank chief.

Turkey’s current account balance posted a surplus of $528 million in August, versus a deficit of $4 billion in the same month last year, the Turkish Central Bank announced on Oct. 11.

Thanks to soaring tourism and export revenues, the current account balance posted a surplus for the first time after a 10-month period in August.

The country’s 12-month rolling deficit reached $23.03 billion. The 12-month rolling deficit also saw the deepest point during the last 13 months in August.

Excluding gold and energy, the country’s current account balance posted a surplus of $4.43 billion in August, up from a $1.54-billion surplus in the same month last year.

Meanwhile, the Central Bank revised up its year-end inflation forecasts for the next three years while keeping its medium-term target at 5 percent.

The annual inflation rate is projected to reach 18.4 percent by the end of 2021, up from its previous forecast of 14.1 percent, said Kavcıoğlu.

The revision was mainly driven by higher import costs and food prices, he said.

The bank’s year-end inflation forecast for the next year was 11.8 percent, revised from 7.8 percent, the governor said, adding the inflation is expected to hit 7 percent by the end of 2023 before stabilizing at 5 percent in the medium term.

According to the latest data from the Turkish Statistical Institute, Turkey’s annual inflation rate climbed to 19.58 percent in September.