Turkey's current account deficit surges $6.127bn

ISTANBUL: Turkey's current account deficit surged 127 percent year-on-year to $6.127 billion in February, less than forecast but illustrating the difficulties the country's authorities face in reining it in.

In a Reuters poll of 13 analysts the median forecast was for a $6.2 billion deficit in February.

In the first two months of the year the deficit, the main vulnerability in Turkey's otherwise strong economic outlook, widened to $12.073 billion from $5.758 billion a year earlier, central bank data showed.

"The foreign trade deficit, which jumped 151.4 percent to reach $5.937 billion in February, was the biggest factor in the current account deficit rise," a statement from the bank said.

The latest data on the gap, widened partly by Turkey's dependence on increasingly expensive energy imports, had a muted effect on financial markets.

The lira  was weaker than Friday's close but off morning lows hit before the figures were released.

Higher oil prices and strong domestic demand continued to widen the deficit, but total financing needs remain modest due to a sharp increase in unexplained capital inflows, said JP Morgan economist Yarkin Cebeci.

"The widening of the current account deficit once again underlined the need for tighter monetary and fiscal policies," he said.

The central bank launched an unorthodox policy last December comprised of lower interest rates to deter flows of hot money, and higher required reserve ratios (RRRs) to dampen credit growth, which grew 34 percent last year.

Although the policy has not triggered inflation shock as some analysts had feared, nor has it yet managed to slow down the rate of credit growth to the 20-25 percent pace sought by the central bank.

Last year, the current account deficit widened 247 percent to a record high of $48.557 billion, some 6.7 percent of gross domestic product (GDP).

In 2011 as a whole, the current account was expected to show a deficit of $59.2 billion and many predict the deficit could hit 7.5-8 percent of GDP this year.