Turkey’s current account gap narrows less than expected

ANKARA

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Turkey’s current account deficit, among the biggest in emerging markets, was a wider-than-expected $3.4 billion in April, though below March levels, mainly due to the rise in the outflow of capital, which also included the dividend transfers, data from the Central Bank showed on June 11. 

“Although the foreign trade deficit decreased by $2.25 billion to $3.33 billion in April from the same month of the previous year, the rise in capital outflows, which also include company’s dividend transfers, by $595 million to $892 million, became the biggest factor which prevented a sharp decrease in the current account gap,” said the bank in a written statement. 

The dividend payments of Turkcell played a role in raising the gap, according to Burgan Investment Chief Economist Haluk Bürümcekçi. 

“It is estimated that Turkcell made around $600 million of its $1.5 billion dividend payments to foreigners in April. This caused a hike in the current account gap,” he said, as quoted by Reuters. 

According to the Central Bank data, the current account gap decreased by 13.44 percent in the first four months of the year to $14.47 billion compared to the same period of the previous year. The year-on-year gap decreased to $44.26 billion from $45.78 billion in line with the decrease in oil prices as well as the increase in the country’s gold exports. 

While Turkey imported gold worth $307 million in April 2014, the country exported around $1.18 billion worth of gold in April this year, according to the Central Bank data. 

Economy Minister Nihat Zeybekci said the country would close the year with less than $40 billion current account gap in line with the government targets in a written statement following the release of the data. 

The data highlighted Turkey’s vulnerability to higher global borrowing costs as the U.S. Federal Reserve prepares to raise interest rates, driving up the U.S. dollar and Treasury yields, according to analysts. 

Attila Yeşilada of Global Source Partners in Istanbul agreed that foreign debt financing was a key challenge for Turkish corporates.

“The smaller deficit is positive as it should support the Turkish Lira. But the elephant in the room is the foreign debt repayment requirement which is now at about $200 billion, a huge sum contributing to the weakness of the lira. Turkish corporates continue to borrow more than their export receivables in foreign currency,” he said, as quoted by Anadolu Agency. 

He said the pressure to repay foreign currency debt is already hurting cash flow at Turkish corporates.