Turkey experiences a $2 billion deficit in its current account during June.
Turkey's Current Account Deficit Surges in June 2022
Turkey's current account deficit saw a significant increase in June 2022, according to data released by the Central Bank of the Republic of Turkey (CBRT) on Tuesday. The deficit registered around $2 billion, exceeding expectations, primarily due to a surge in imports and a decline in exports.
The increase in import volumes, up by about 7.9% year-on-year, was driven by strong household consumption despite efforts to control inflation. This resilience in domestic demand caused import costs to rise, widening the goods trade deficit. Exports, on the other hand, fell by about 1.1% year-on-year, worsening the trade balance.
The weak capital flows also played a role in the increased deficit. There were significant net outflows, especially from the banking sector, leading to a decline in foreign exchange reserves by $4.1 billion. This indicates tight external financing conditions.
Excluding gold and energy, the balance registered a net surplus of about $2.6 billion in June. However, the goods trade balance recorded a deficit of nearly $6.5 billion, contributing to the higher-than-expected current account deficit.
The services sector, on the other hand, posted a surplus of $62.1 billion for the year. Net inflows from the services sector in June were nearly $6 billion, with net revenues from travel services amounting to $5 billion and transportation services totalling $1.88 billion.
Despite these figures, no specific information was provided about the impact of the higher-than-expected current account deficit on the economy. The annualized current account deficit, as per the CBRT, stood at $18.9 billion.
In May, the current account deficit was $684 million. The goods deficit for the year stood at $63.3 billion, with the current account deficit in June being higher than the deficit in May. The primary income posted a gap of $17.6 billion for the year, while the secondary income posted a gap of $100 million.
These developments reflect persistent macroeconomic imbalances, including strong domestic demand and challenges in export performance, leading to a worsening current account position. The goods trade balance, particularly the surge in imports fueled by strong consumption and decreased exports, were the main contributors to the increased current account deficit in June 2022.
- The surge in imports, driven by strong household consumption, and the decrease in exports, have led to a deterioration in the goods trade balance within the Turkish travel industry, contributing to the increase in the current account deficit.
- The increased current account deficit in June 2022, largely due to higher import costs and decreased exports, may pose challenges for finance sectors as they adjust to the tight external financing conditions.
