Tourism blow to current account deficit
Foreign trade figures for January released at the beginning of this week have revealed that the deficit has decreased 13.4 percent from $4.343 billion to $3.762 billion. In parallel with the declining foreign trade this year, the current account deficit is expected to continue shrinking. Specifically, the fall in energy prices will be the most important factor in the narrowing of the deficit.
On the other hand, the base effect of the gold trade is expected to be a factor limiting the shrinkage in the current account deficit. The decline to be experienced in tourism income will inevitably have also an increasing effect in the current account deficit.
For this reason, the current account deficit figure, which is expected to go down to 3.5 percent of the national income, may be slightly higher.
While the foreign trade deficit decreased 13.4 percent, rate of exports meeting imports went down from 73.9 percent to 71.8 percent. When seasonally adjusted, in January 2016, exports shrank 1.1 percent compared to the previous month and imports shrank 1.5 percent.
The share of the EU countries in exportation was 42.7 percent in January 2015; it went up to 49.5 percent in January 2016. This shows that in connection with the recovery in economy, it will be the EU countries that will determine export levels of the coming term.
The situation with Russia is more complicated. While importation is inevitably continuing because of the need for energy, exports have started being affected negatively.
As a matter of fact, we have started seeing the effect of Russia not only in foreign trade but also in tourism.
The fact that only 55 Russian tourists came to Antalya in February is an indicator of huge problems. In summer months when tourism peaks, we will be talking about the problem in tourism more with both regional trade shrinkage and current account deficit figures.
Serious drops are expected in the number of tourists coming from Europe, not only from Russia, because of the fear of terror. Tourism investors expect at least 60 percent decreases in the number of incoming tourists and tourism income this year.
Thus, it is now definite that the drop in energy costs will not directly reflect the current account deficit because of the problems in tourism.
Of course, energy prices throughout the year will also be important but the drop to be experienced in tourism revenues will determine how much the current account deficit will shrink.
The current account deficit has reached a key position in terms of Turkey’s economy. For instance, the Fitch report last week still had a positive outlook for Turkey, despite the risk of high inflation and political instability; the most important reason for this was the expectation of a decline in the public deficit and current account deficit.
Thus, the expected recovery not happening in the current account deficit will have a critical role in disrupting the macro equilibrium outlook.