Jul 11 2018

Turkey current account gap widens in May; lira drops

Turkey’s current account deficit widened more than expected to $5.9 billion in May. The lira fell.

The May deficit increased by $516 million from the same month a year earlier, the central bank said on its web site on Tuesday. The gap for the month was the largest since January.

The central bank’s foreign currency reserves fell by $2.8 billion during the month as it sought to meet the financial shortfall. The rolling 12-month deficit widened to $57.6 billion, equivalent to 6.5 percent of GDP at the end of March, which was $884 billion.

Short-term portfolio investments, critical in helping Turkey fund the deficit in the absence of insufficient foreign direct investment, recorded a net outflow of $1 billion. Direct investment inflows declined to a net $429 million in the month from $703 million in May 2017.

Investors in Turkey are looking for signs that the economy is slowing after government stimulus measures and a sell-off in global financial markets led to a depreciation in the lira of 20 percent this year.

The lira fell 0.8 percent to 4.75 per dollar at 10:20 a.m. in Istanbul. The embattled currency reached a record low of 4.92 per dollar in May, forcing the central bank to raise interest rates by a total of 425 basis points to 17.75 percent to stave off a possible currency crisis.

Tourism revenue increased by $549 million to $1.7 billion in May from a year ago, the bank said.

Net errors and emissions, capital flows that go uncategorised, recorded a net inflow of $3.4 billion in May, the most for a month in more than three years.

Turkey current account