Jun 11 2018

Turkish current account gap widens; portfolio inflows slump

Turkey’s current account deficit widened by $1.7 billion to $5.4 billion in April as imports outpaced exports. Portfolio inflows slumped, highlighting the difficulties the government has in funding the shortfall.

The current account gap increased to an annualized $57 billion, or about 6.5 percent of gross domestic product, according to central bank data published on Monday.

Portfolio inflows, which Turkey partly relies on to fund the deficit without deploying its declining foreign currency reserves, were a negative $502 million in April and slid to $1.8 billion for the first four months of the year from $5.7 billion a year earlier. Foreign direct investment totaled $1.8 billion for the January to April period, down from $2.7 billion a year ago.

Turkey’s central bank has raised interest rates by 425 basis points to 17.75 percent over the past month, the highest level in major merging markets outside of Argentina, as it sought to stem a record slump in the lira. The widening deficit and inflation of 12.2 percent has raised concern for economic overheating and a ‘hard landing’.

Imports increased 16 percent, more than double the pace of exports, which rose 7 percent. Gold imports quadrupled to $5.4 billion.

Foreign exchange reserve assets fell $2.8 billion in April and $2.1 billion in the first four months, the data showed.

Tourism revenue, also an essential resource for funding the deficit, rose by about $1 billion in the first four months to $3.8 billion.