Turkey’s current account deficit all but disappears after lira crisis

Turkey’s chronic current account deficit has all but disappeared after a currency crisis ravaged demand for imports.

Turkey posted a current account surplus of $151 million in May, the central bank said on Thursday. That reduced the 12-month deficit to $2.37 billion, or 0.3 percent of its economic output of $748 billion.

The current account deficit has narrowed sharply from 6.5 percent of GDP last summer after a slump in the lira caused an economic recession and crimped demand for imported goods and services. The lira lost 28 percent of its value in 2018 and is down about 8 percent this year.

The May surplus compared with a deficit of $6.17 billion in the same month a year earlier, when the government was railroading through policies to stimulate economic growth.

The Turkish government is seeking to depict the erosion of the current account deficit as an economic success story. But Turkey has suffered from a chronic long-term deficit problem, except in times of economic crisis, because it imports nearly all the energy it consumes and relies heavily on imported goods and raw materials to produce many of its exports.

The current account posted a $3.47 billion surplus for May when excluding gold and energy compared with a deficit of $1.2 billion 12 months earlier.

The central bank’s foreign currency reserves increased $3 billion during May.

The current account is the widest measure of the flow of goods, services and capital in and out of an economy.