Data tell different things to minister, economists

ISTANBUL - Hürriyet Daily News

Economy Minister Çağlayan attributes Turkey’s narrowing current account deficit to a pick-up in exports like the ones made by this furniture firm based in Antalya. Hürriyet photo

Turkey’s current accounts deficit was down to $34.4 billion in the first seven months of 2012, according to the balance of payment figures released yesterday by the Central Bank of Turkey.

The bank said the current accounts deficit was down $15.7 billion to $34.4 billion year-on-year in the January-July 2012 period. This is a 31 percent reduction in the deficit from the same period last year.

The bank said the development was mainly attributable to the $13.55 million decrease in the foreign trade deficit, recording $40.89 million, and the $1.22 million increase in net services income, recording $9.72 million, as well as the $1.04 million decrease in net income outflows, recording $4.03 million.

Under the services account, travel revenues and expenditures decreased by $88 million and $678 million compared to the same period in 2011, recording $11.48 million and $2.25 million respectively, according to the bank.

Economy Minister Zafer Çağlayan said the narrowing of the current account deficit was due to the pick-up in exports.

“The narrowing of the current account deficit is not due to a fall in imports as some claim, but rather a rise in exports. The lion’s share comes from increasing exports. Just like with yesterday’s growth figure, the boom in our exports is also pulling down our current account deficit,” he said, commenting after the figures had been released.

“The $3.85 billion current account deficit on a monthly basis is the lowest number for the past 21 months. The narrowing of the current account deficit is the result of the successful policies of our government and its related institutions,” he said. Çağlayan expects the current account deficit to be at 7.7-7.8 percent of gross domestic product (GDP) by the end of the year.

Çağlayan also said Turkey’s efforts to diversify its markets to A frica, North and South America and Asia were paying off.

Too soon to celebrate
 
However, Istanbul University Economy Theory Department head Dr. Kaya Ardıç told Anatolia news agency that while the narrowing of the current account deficit was a positive development, it had come about due to the slowing economy.

“We would have hoped that this narrowing would have come about without a slowdown in the economy, but Turkey’s production structure is based on external dependency, primarily energy. In order to produce, we have to import. As we import, our current account deficit widens. However, now as the economy is slowing, imports and production are also falling and this is reflected in the current account figure,” he said. He also expressed doubt that Turkey would be able to achieve its 4 percent growth target this year.

ING Chief Economist Şengül Dağdeviren said the current account deficit was the lowest since March 2011, but that she expected the improvement in the current account deficit would lose momentum and stabilize in the coming months. She said the narrowing of the foreign trade deficit, which indicated a fall in economic activity and was the most important component of the current account deficit, was an important factor in the July current account deficit reading.