Turkey: Current Account Surplus At Record High

External balances have improved significantly in recent months thanks mainly to a sharp decline in imports. Meanwhile, more competitive prices have boosted exports to a record high on a 12-month rolling basis.

Source: shutterstock

External balances have improved significantly in recent months thanks mainly to a sharp reduction in imports and as better prices pushed exports to a record high on a 12-month rolling basis, to US$5.9 billion. That was impacted by a US$2.5 billion surplus in September, higher than the consensus at US$2.0 billion and our call at US$ 2.3 billion. Tourism revenues also contributed to the rebalancing, with a 14.6% year-on-year increase, reaching US$28.5 billion on a cumulative basis, close to the all-time high realized in 2014 on the back of a) the recovery from the crisis following the shooting down of a Russian plane by Turkey four years ago b) increasing price attractiveness in the aftermath of sharp depreciation in the Turkish lira last year.

External Balances (USD bn, 12M rolling)

Source: TurkStat, CBT, ING

On the capital account, September showed minor outflows at US$0.7 billion with asset acquisitions by locals more than debt creating flows. Adding outflows via net errors & omissions at US$-1.8 billion, official reserves remained practically unchanged.

In the monthly breakdown, residents acquired foreign assets worth US$2.9 billion mainly via deposit holdings of local banks. Inflows by non-residents, on the other hand, stood at US$2.2 billion driven by: 1) gross FDI at US$0.6 billion 2) trade credits at US$1.2 billion 3) rising deposit holdings of non-residents at local banks amounting to US$0.8 billion. It should be noted that net borrowing was in negative territory mainly due to long-term debt repayments of banks, though corporates were net borrowers in September. Accordingly, the rollover ratio for banks was at 47% (69% on a 12-month rolling basis) vs 117% for corporates (101% on 12M rolling average).

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