Gold sales help narrow the current account gap

ANKARA - Hürriyet Daily News

A shopfront of goldsmith in Istanbul is seen in this photo. Turkey’s gold trade with Iran has contributed to narrow the country’s current account deficit.

Turkey’s much discussed gold trade with Iran has contributed significantly to a major narrowing in the country’s current account deficit, the Achilles heel of the growing economy. The $2.5 billion monthly narrowing, from a larger $4.5 billion in the same month a year earlier, mainly derived from the relatively high performance in exports and the unwanted recent slow down in the economy, economists agreed.

$1.5 billion of the improvement was sustained by the nearly $1.5 billion in gold sales, $1 billion of which reportedly went to Iran via the United Arab Emirates. Most of the remaining went to Switzerland.

The lion’s share in the improvement in balance of payments comes from exports, Economy Minister Zafer Çağlayan said yesterday in a written statement.

The nearly $2 billion gap in October was the second lowest of the last 35 months, after the August figure, he said.

Down from $65 bln

The nine month gap in 2012 amounts to $41.1 billion, down from $65 billion in the same period a year earlier.

$18.1 billion of the $23.9 billion improvement came from the increase in exports in goods and services, while another $5.2 billion came from the fall in imports, the minister said.

In October, goods and services exports rose by 10.3 percent year on year.

As Turkey’s core exports market Europe have been struggling with its economic crisis and trade with the Middle East has been facing security problems and political instabilities, a major boost to the country’s exports came from an unexpected rise in gold sales to Iran and Abu Dhabi.

The country’s exports in precious metals, which include gold, jumped to $14.3 billion in the first 10 months from $2.7 billion a year ago. Most of the sum went directly to Iran or via Abu Dhabi, as a part of a de facto gold for gas trade with the U.S sanctions-hit Islamic Republic.

“Despite the evident fall in current account deficit, the improvement in national savings remains limited due to the decline in investments,” warned Odeabank in a note to investors yesterday. “Exports have been recording robust increases thanks to goods and destination country diversification, while imports are still under pressure due to the ongoing contraction in domestic demand ... We envisage the deceleration in the current account deficit to be limited in the coming months through the recovery in domestic demand,” the note said.

There is also an evident acceleration in transportation services income, which rose by 116 percent year on year to $700 million in October and by 115 percent year on year to $4.3 billion during the January-October period, Odeabank also said.