Aug 09 2019

Turkey posts first current account surplus of Erdoğan era after crisis

Turkey posted an annual current account surplus for the first time since President Recep Tayyip Erdoğan’s ruling party came to power 17 years ago after a currency crisis ripped through the economy.

The surplus for the 12 months to June was $538 million, the central bank said on its website on Friday.

Economic activity in Turkey has slumped since last summer, when the lira slid to a record low against the dollar. The decline in the lira pummeled demand for imports and spurred inflation and interest rates to the highest levels in a decade and a half.

Turkey reported the rolling 12-month current account surplus after posting a deficit of $548 million for June alone, $2.47 billion lower than the same month a year earlier.

The central bank said its foreign currency reserves posted a net outflow of $2.5 billion. The bank has sought to defend the lira through sales of dollars and euros.

The lira fell 0.2 percent to 5.48 per dollar at 10:58 a.m. in Istanbul, weakening from the highest levels since early April. It had hit a 15-year low of 7.22 per dollar last August at the height of the currency crisis.

Erdoğan’s government has sought to portray the erosion of the current account deficit – it had reached 6.5 percent of GDP early last summer – as a reflection of Turkey’s economic progress and strength.

But the disappearing deficit is largely the result of a slump in imports, which have declined by an annual 20 percent in the first six months of the year. Turkey relies on imports for nearly all its energy needs and imported materials and intermediary goods constitute around 70 percent of the finished products that Turkey exports. Tourism income in Turkey has also helped the deficit to narrow as lower prices drew more visitors to the country.

Turkish exports increased an annual 1.9 percent in the first half of the year, official data shows.