Turkey’s C/A deficit seen at $3.15bn in August, year-end forecast jumps to $55.5bn

Turkey’s current account is seen recording a deficit of $3.15 billion in August, a Reuters poll showed on Wednesday, while the forecast for 2022 jumped to $55.5 billion, with economists citing an expected decline in exports and soaring energy prices.

The trade deficit, a major component of the current account balance, soared 160% in August to $11.19 billion, mainly due to Turkey’s hefty energy import bill.

In a Reuters poll, the median estimate of 13 economists for the current account deficit in August was $3.15 billion, with forecasts ranging from $2.20 billion to $3.80 billion. The median forecast for the deficit in 2022 jumped some $9 billion from last month’s poll to $55.50 billion.

Forecasts ranged between $48.50 billion and $60.00 billion.

Ozlem Derici Sengul, founding partner at Spinn Consulting, cited a potential further decline in exports and high energy prices for the upward revision.

“Natural gas costs are not falling and Europe is entering an energy crisis, which means it looks like our exports will fall more than expected and energy costs will continue to rise as well,” she said. The median forecast for 2022 stood at $46.19 billion in September and at $40.15 billion in August.

Ankara sees the deficit at $47.3 billion this year, according to official forecasts.

Under President Tayyip Erdogan’s economic plan, which prioritizes growth, exports and employment, with low interest rates, the central bank has cut its policy rate by 500 basis points in 2021, triggering a currency crisis that saw the lira lose 44% against the dollar that year.

Turkey’s C/A deficit seen at $3.60bn in July, more than $46bn in 2022

It cut the one-week repo rate by 200 basis points in the last two months to 12%, bringing the lira’s losses this year to 29%.

The government says Turkey’s chronic current account deficit, which stood at $14.9 billion last year, will turn to a surplus under the plan but the new forecasts, which covers 2025, do not see that happening.

Turkey’s central bank is scheduled to announce the August current account data at 0700 GMT on Oct. 11.