Turkey's current account deficit at $62mn in Oct, some forecast surplus

ANKARA: Turkey's current account is expected post a relatively small deficit of $62 million in October, a Reuters poll showed on Wednesday, as exports stood at an all-time high.

In the poll of 12 economists, forecasts for October ranged between a deficit of $600 million and a surplus of $550 million. The median estimate forecast a $62 million deficit.

Turkey's foreign trade deficit, a main component of the current account, climbed 34.4% year-on-year in October to $2.37 billion according to the general trade system, data from the country's statistics institute showed.

The relatively strong performance of the current account in October is due to exports standing at a record high level, and a drop in imports compared to previous months, said Daglar Ozkan, economist at Is Yatirim.

"Imports weren't as high as they were in September, the reduction of gold imports contributed to this. Therefore, we will see the one of the best monthly performances this year of the current account in October," he said, adding that the deficit would likely increase again in November.

For the whole year, the median response of 11 economists was for a current account deficit of $35 billion, unchanged from last month's survey, with forecasts ranging between $32 billion and $36 billion.

Turkey's long history of current account deficits - which topped $52 billion in 2018 - has again been worrying investors after the lira touched record lows and the central bank ate into its foreign exchange reserves.

Ankara expects a deficit of $24.4 billion, or 3.5% of GDP this year. Without the downturn in tourism due to the coronavirus pandemic and surging demand for gold, Turkey would have posted a surplus of $12.4 billion, according to government estimates.

The current account is expected to recover in 2021 and could end the year with a deficit around $20 billion or less, said Ozkan, and a slowdown in credit growth would lead to a first quarter contraction in imports. An expected recovery in tourism starting in spring would also support the current account.

"We will see an inevitable slowdown in economic activity in the first half of 2021. Taking into account tourism as of April-May, there will likely be significant improvement in the current account," he said.

The central bank is scheduled to announce the October current account data at 0700 GMT on Dec. 11.