The central bank said Turkey’s March current account deficit of USD 3.3 bn declined by USD2.12 billion from the same month of 2020 bringing down the 12-month rolling deficit to USD36.2 billion from USD38.3 bn a month ago. Thus, the projected contraction of the annual current account deficit level for this year has also begun.
The current account deficit of USD7.8 billion for the January-March 2021 period is also below the current account deficit of USD8.8 billion reported in the first quarter of last year.
The foreign trade deficit in the first quarter of the year was USD7 billion, well below the USD9.6 billion in 1Q20. In addition to increasing export revenues, the decline in gold imports stands out as a factor that shrinks the trade deficit. Gold imports of $1.5 billion in March 2020 are as much as $0.3 billion in March 2021 and is down to USD2.0 billion in 1Q21 down from last year’s USD4.3 billion. Tourism revenues continue to slide as it was down to USD 1.5 billion from USD 2.8 billion in the first quarter last year.
There is massive foreign capital outflow in March following the unexpected dismissal of central bank governor Agbal Direct investment inflows are limited to USD0.4 billion, while inflows from other investments are USD0.9 billion. The amount of portfolio investments that have fled the country isUSD5.7 billion. Net outflow makes a total of USD4.4 billion.
Therefore, central bank reserves for deficit financing have fallen by USD6.17 billion. This takes the loss of bank reserves to USD1.7 billion in the first quarter. In March following Agbal’s dismissal TL lost as much as 15% of its value against the dollar.
Net errors and ommissions, or unspecified capital movements, had USD1.6 billion inflows in March, which brought annual like-for-like inflows to USD6.9 billion.
Looking forward, Turkey is expected to post USD28 bn current account deficit in 2021 which is down by roughly USD10 bn compoared to 2020. Despite the drop in the financing need, financing difficulties prevail as TUrkey fals to attract funds flows given the troubles in its economic management and tourism sector is not expected to post a strong rebound.