Turkey’s current account gap drops to $589M in March, at its lowest since 2009

Picking up from where it left off at the end of last year, Turkey has continued to see a gradual decline in its current account deficit.

With measures taken by the government and the stabilization process in the economy, the country's 12-month rolling current account deficit has dropped to $12.83 billion in March, its lowest level since the end of 2009.

The monthly current account deficit in March also saw its lowest level since October 2015 and dropped to $589 million, decreasing by $4.14 billion year-on-year, according to the Central Bank of the Republic of Turkey (CBRT) report released Monday. The figure was nearly $4.73 billion in the same month of 2018.

A group of 17 economists, surveyed by Anadolu Agency, estimated a $900-million deficit in March, while, on the other hand, the median of 12 forecast in a Bloomberg survey was for a gap of $1 billion.

Economists expect the country's current account deficit to maintain its trend and continue to narrow down in April as well and drop below $10 billion.

Decline to continue rapidly during first half of this year

Haluk Bürümcekçi, economist and financial analyst at Anadolu Agency (AA), said recovery in the current account balance will continue until end of the first half of 2019.

"Lower foreign trade deficit versus the last year and posting surplus of services item were main factors for recovering of the current account deficit," he noted.

Bürümcekçi said that he expected the country's year-end current account deficit will be $10 billion.

Banu Kıvci Tokalı, the chief economist of HalkInvest, a subsidiary of state lender HalkBank, stressed the current account deficit could drop to $8-10 billion in April, of which data will be released in June.

She underlined that the decline in the deficit would continue rapidly during the first half of the current year due to policies to support exports, the base effect and moderate energy prices.

Tokali forecast that the country would close the year with a $19 billion current account deficit. "The current-account-deficit-to-GDP ratio, which was 5.6 percent in 2017 and 3.6 percent in 2018, could fall to 2.6 percent by the end of 2019," she added.

Orkun Gödek, DenizBank Investment Group strategist, highlighted that the current account deficit of $589 million was under the expectations of $1 billion in March.

"In the first quarter, the current account deficit was $1.9 billion, while it was $16.2 billion in the same quarter last year," he said.

In an interview broadcast on Sunday, Treasury and Finance Minister Berat Albayrak said the current account deficit, which nearly hit $60 billion last year, will nearly be zeroed by the end of May.

Albayrak said the current account balance and surplus were in a period of rapid recovery and that there would be no external financing requirement in the next period.

The central bank said in its report yesterday that the development in the current account is mainly attributable to a $3.7-billion decrease in the goods deficit recording net outflow of $916 million.

The CBRT also said Turkey's current account deficit – excluding gold and energy – posted a $3.5-billion surplus in March 2019, versus a $573-million deficit in the same month last year.

"Services item realized net inflow of $1.3 billion increasing by $113 million compared to March 2018," the bank said. It added that travel item under services recorded a net inflow of $1.04 billion, rising by $55 million compared with March 2018.

Previously, current account deficit fell 88.4 percent in January to $813 million deficit, indicating a decrease of $6.22 million compared to January of the previous year, bringing the 12-month rolling deficit to $21.59 billion, the lowest level of 105 months.

In February, it fell to $718 million, down by $3.78 billion from the same month last year. The 12-month rolling deficit reached $17 billion in the month.

Economists forecast that the 2019-end deficit will be $13.8 billion.

Last year, the current account balance posted a deficit of around $27.6 billion, improving from a nearly $47.5 billion deficit in 2017. It realized at around 3.5 percent of the country's gross domestic product. The figure was the lowest since 2009, while Turkey's highest annual current account deficit over the last decade was seen in 2011, with $74.4 billion.

The country's new economic program, announced in September 2018, targets a current-account-deficit-to-GDP ratio of 3.3 percent this year, 2.7 percent in 2020 and 2.6 percent in 2021.