Turkish current account deficit narrows; lira gains
Turkey’s current account deficit narrowed in July in a further sign that the $882 billion economy is rebalancing following a currency crisis. The lira climbed.
The deficit fell to $1.75 billion in July, in a $2.96 billion decrease from the same month a year previously, the central bank said in a statement on Friday. Net errors and emissions, or flows of capital that go unreported, recorded an inflow of $2.98 billion.
The narrowing in the July deficit brought down the rolling 12-month figure to $54.6 billion, or 6.2 percent of recorded GDP. The gap had stood at 6.5% of GDP the previous month.
Turkey’s lira has slumped almost 40 percent against the dollar this year, making imports more expensive to local consumers and rendering exports cheaper. The lira’s decline has raised concern for a full-blown economic crisis in the country, as foreign debt becomes more expensive to repay. A rate increase by the central bank of 625 basis points to 24 percent on Thursday has partially eased those concerns.
The lira rose 0.4 percent to 6.05 per dollar at 10:53 a.m. in Istanbul, reversing earlier losses.
Portfolio investment recorded a net outflow of $279 million, while net direct investments totaled $707 million, the central bank said. Other investment posted a net inflow of $764 million, it said.
Official reserves increased by a net $2.42 billion, the central bank said.
Investors are concerned that Turkey will fail to finance the deficit through financial resources such as foreign currency reserves and tourism revenues as investments from abroad decrease.
The central bank has about $27 billion of net foreign currency reserves, including gold. That capital excludes required reserves held by banks at the central bank.
(Story was updated with net errors and emissions figure in second paragraph.)