Turkey: Current account deficit widens in February
The current account deficit widened markedly from USD 0.1 billion in February 2019 to USD 1.2 billion in February of this year (January 2020: USD -1.6 billion; previously reported: USD -1.8 billion). The figure marked the third consecutive monthly shortfall and the 12-month rolling sum of the current account consequently narrowed from a USD 7.2 billion surplus in January to a USD 6.1 billion surplus in February—the smallest surplus in nine months.
The increased deficit in February chiefly reflected a greater merchandise trade shortfall. Imports grew 9.7% year-on-year in the month, compared to a 19.9% contraction in the same month a year prior; exports, meanwhile, grew a tepid 2.0% in February 2020 (February 2019: +2.9% year-on-year). On the other hand, the services trade surplus rose on strong export growth.
On the financial front, there was a net inflow of USD 3.1 billion, up from the USD 0.8 billion inflow recorded in the same month a year prior (January: USD 1.6 billion inflow). This chiefly reflected a reduction in banks’ assets held abroad. Lastly, official reserves rose by USD 3.0 billion.
This year, Turkey is expected to remain in a current account deficit as domestic demand returns and exports are hit by Covid-19. However, the outlook is uncertain due to the Covid-19 pandemic, which will weigh on trade and disrupt supply chains.