Turkey posts biggest current account deficit since April; lira drops

Turkey reported a current account deficit of $4.6 billion in August compared with a surplus of $3.3 billion a year ago as imports surged. The Turkish lira extended losses.

The August deficit was the largest in four months, central bank data published on Monday showed. The April shortfall of $5.2 billion had been magnified by a slump in exports due to outbreak of COVID-19.

Investors say Turkey’s widening current account deficit symbolises growing imbalances in the economy, exacerbated by a government-backed borrowing splurge by businesses and consumers. Imports have continued to rise despite a slump in the lira’s value. The currency dropped to a record low of 7.9591 per dollar on Friday before recovering later in the day.

The deficit in August was spurred on by the trade deficit, which increased by an annual $3.9 billion to $5.3 billion, the central bank said.

The lira traded down 0.7 percent at 7.91 per dollar, extending losses made earlier in the day. The currency has weakened by about 25 percent this year.

The current account, excluding energy and gold, posted a surplus of $973 million, narrowing from $6.2 billion a year ago. Turkey imports almost all the energy it consumes and has been buying more liquefied natural gas from the United States and Qatar to help reduce the bill.

The deficit matched the average expectations of economists in a survey by Reuters last week. Forecasts had varied between a gap of $1.5 billion and $4.9 billion.

The central bank said its foreign currency reserves fell by $7.6 billion in the month. The bank has sold tens of billion of dollars of its reserves this year to defend the lira, which hit successive record lows throughout the summer.

Portfolio investments registered a net outflow of almost $2 billion, the central bank said. Turkey relies on foreign investment and revenues from tourism to help fund the current account deficit.