Turkey's current deficit widens as gold imports surge

ISTANBUL

Turkey’s current account deficit, the economy’s main weak spot, widened to a bigger-than-expected $5.786 billion in July, data showed Sept.12. DHA photo

Turkey’s current account deficit widened to a larger-than-expected $5.8 billion in July, the figures released by the Central Bank Sept.12 showed, as Economy Minister Zafer Çağlayan said the gap was related to the rise in gold imports. Also, the net errors and omissions item, which shows exchange flow whose source is undetermined, reached $4.8 billion.

Çağlayan stated that as July’s current account deficit reached 5.8 billion, the total deficit rose to $42.1 billion in the first seven months of this year, adding that that economy posted $34.1 billion in the same period last year. The gap is $8 billion higher than last year because of an increase in gold imports.

“While the volume of gold imports was $5.6 billion in the first seven months of 2012, it rose to $11.1 billion in the same period this year,” he said. Çağlayan claimed that the exports volume was better than last year – except for gold exports.

However, the banking sector said a fall in tourism income also played a role in widening the current account deficit. Burgan Investment Chief Economist Haluk Bürümcekçi told Reuters that the rise in gold exports, along with a contraction in gold exports, was the principal factor in the current account deficit, while a slowdown in the tourism income rate of increase also affected it.

Meanwhile, the net errors and omissions item reached $4.8 billion in July. This item represents foreign exchange flow whose sources are not determined. It means an undetermined $4.8 billion entered into the Turkish economy.

While the net errors and omissions financed $4.8 billion of the current account deficit, the Central Bank reserves financed $1.7 billion of it.

Service export rise

The minister said the current account deficit-gross domestic product (GDP) ratio was 8.8 percent in the first half of this year, noting that they expected it to approach 7 percent by the end of the year. Service exports, which rose by 16 percent in the first seven months, will support it, he said, adding that they set a target for Turkey’s service export volume to surpass $48 billion.

The Central Bank said between January and July, under non-financial gold items, gold imports rose to $11.9 billion and the gold export decreased to $2.7 billion. Under the services account, tourism revenues rose to $15.4 billion in the same period while tourism expenditures increased to $2.8 billion.

Çağlayan said this week that the current account deficit would stay below $60 billion this year. The current account deficit totaled $36 billion in the first half of 2013, rising $5.9 billion over the same period last year. The year-end expectation for the current account gap in the Medium-Term Program is $60.7 billion.