Turkey’s current account stays in deficit for 10th consecutive month

Pressure on Turkey’s economy continued as the current account deficit stayed on for the 10th consecutive month mainly due to a hit from a global rally in energy prices, reviving gold imports, and domestic demand-driven factors.

 The shortfall in August turned out to be US$-3.1bn, broadly in line with the market consensus, and led to further widening in the twelf month figure to $40.9bn, the highest since the 2018 financial volatility, Turkey’s central bank said on Tuesday. 

The key drivers on the monthly increase were the continuation of higher net energy imports, which almost doubled in comparison to the same month of last year, the significant acceleration in net gold imports to $2.2bn from a mere $0.2bn a year ago, and the turning of the core trade balance (excluding gold and energy) to deficit this year from a surplus.

Tourism revenue was $5.1 billion, with services posting a surplus of $7.2 billion. Foreign tourist arrivals rose by an annual 58% in August, according to a separate data release. 

The current account gave a surplus of 6 billion 276 million dollars when gold and energy imports were excluded. 

Official reserves rose by $10.8 billion in August. Russia is a likely source of funding, with Turkish officials telling that Russia’s Rosatom Corp. was in the process of transferring $15 billion to a local subsidiary building the $20 billion Akkuyu nuclear plant on the Mediterranean coast.

The central bank will chair its next rate-setting meeting on Oct. 20, and publish the final inflation report of this year a week later. The bank has cut its benchmark interest rate by a cumulative 200 basis points in the last two months, citing a slowdown in economic activity.