Turkey: Current account deficit widens in November
Turkey’s current account recorded a USD 4.1 billion deficit in November (November 2019: USD 0.0 billion; October 2019: USD -0.3 billion). This was a larger shortfall than anticipated by market analysts and marked the 12th consecutive month of deterioration, reflecting the country’s worsening external position that has been exacerbated by the Covid-19 crisis. Moreover, on a 12-month rolling basis, the current account deficit widened to a 26-month high of USD 38.0 billion in November (October 2020: USD -33.9 billion).
The annual deterioration in the current account balance reflected a marked uptick in the merchandise trade deficit and a smaller services trade surplus amid the lingering impact of the global pandemic. The tourism sector has been particularly hard-hit by the pandemic, with tourist arrivals down over 60% in the month. Meanwhile, firming domestic demand was partially behind the wider merchandise trade deficit as imports jumped 15.9% year-on-year in November, while exports fell 1.2% over the same month a year prior—renewed Covid-19 restrictions weighed on trade flows.
On the financial front, there was a net inflow of USD 0.9 billion in November, markedly below the USD 3.8 billion new inflows recorded in the same month a year earlier (October 2020: USD 2.9 billion inflow). The print reflected non-resident inflows into local debt and equity being partially offset by banks increasing their currency and deposits within their foreign counterparts. Lastly, official reserves dropped by USD 0.1 billion in the month.