Turkey's current account deficit narrowing

ISTANBUL

Turkey’s exports hit $60 billion in the first five months a sign of the narrowing current account deficit, says Minister Çağlayan. AA photo

Turkey’s current account deficit was down to $21.2 billion in the first four months of 2012, according to data released yesterday by the Turkish Central Bank.

The bank said the current account deficit dropped $8.06 billion to $21.2 billion year-on-year in January-April 2012.

“We had said we were going to bend the back of Turkey’s current account deficit. The numbers show that Turkey’s current account issue is being dropped from the country’s agenda,” Economy Minister Zafer Çağlayan said yesterday after balance of payments figures were announced.

“The $7.7 billion-dollar drop in the current account deficit from the first four months of 2011 did not surprise us. We could have witnessed an even greater drop, but the exchange rate has been a factor. Each 10 percent drop in the euro-dollar exchange rate amounts to a 4.5 percent drop in our exports,” said Çağlayan.

The minister said the fact that Turkey’s exports hit $60 billion in the first five months of 2012 and $104.5 billion over the past year was a sign of things to come and that Turkey’s current account deficit would narrow even more given the measures Turkey has been taking to lower imports in its foreign trade.

Lower fuel prices

A report for investors published yesterday by Garanti Bank stressed that petrol prices after peaking in March, fell after April from $126 to $98 and that this was one of the factors leading to the narrowing of the current account deficit. As a result, the note read, Turkey’s 2012 current account deficit could be lower than the full year $70 billion expectation.

Vakıfbank Economic Researches also agrees that the recovery in Turkey’s balance of payments is continuing. The bank said in a note to investors yesterday that it was hopeful to see a fall in Turkey’s current account deficit as it signaled an improvement in a structural problem, which is the economy’s main weakness. “However, the facts that the gap is still being financed by short-term capital, also called hot money inflow, and direct investments have been meeting only some 17 percent of the gap since April 2010, show that risks from the financing should not be overlooked,” the bank said.

The drop in the current account deficit was mainly triggered by the decreasing foreign trade deficit, which narrowed by $6.5 billion to $21.9 billion in the first four months of the year. Revenue in the service sector was up $708 million to $2.9 billion, while expenditures fell $729 million to $2.7 million. Under the services account, travel revenues fell to $4.1 billion while travel expenditures dropped to $1.1 billion in the period in question.