Turkey likely to miss current account target
ISTANBUL - Reuters
With the June data, the current account deficit totaled $36 billion in the first half of 2013, rising $5.9 billion over the same period last year. The Turkish economy minister has said the year-end gap will likely be higher than targeted. REUTERS photoTurkey’s current account deficit, one of the country’s main economic problems, dropped below
expectations in June, but the overall gap for the first six months of the year still exceeded the total during the same period last year.
The deficit shrank to $4.445 billion in June from a revised $7.30 billion in May, Central Bank data showed; the market forecast had been a deficit of $5.1 billion.
With the June data, the current account deficit totaled $36 billion in the first half of 2013, rising $5.9 billion over the same period last year.
The main determinant of the current account deficit, the foreign trade deficit, increased by $5.9 billion, reaching $40.4 billion in the first six months of the year.
The June data reconfirmed that the government may fail to achieve its macroeconomic targets for the year-end.
“The year-end expectation [for current account gap] in the Medium-Term Program is $60.7 billion. We’re already passed half of this amount. For now, it seems like the data will come slightly higher than the Medium-Term Program estimation,” Turkish Economy Minister Zafer Çağlayan said in statement released after the announcement of yesterday’s data.
The deviation in the current account deficit is sourced by the weakness in domestic demand and the increase in service sector revenues, mainly thanks to rising transportation income, Odebank Economic Research Director İnanç Sözer told Reuters.
“There was a strong portfolio outflow in June but despite this outflow, the balance of payments resulted in a relatively low deficit. This caused the lower-than-expected widening of the current account gap,” he said.
Turkish shares edged up and the lira firmed yesterday as data showing a narrower-than-expected current account deficit provided some relief for investors worried about tightening global liquidity.
The main Istanbul share index rose above 76,000 points following the release of the data but later pared gains to trade.
The lira strengthened slightly against the dollar, to 1.9295 from 1.9323 late on Aug. 14.
Gap remains risky
The current account deficit, Turkey’s main economic weakness, makes it susceptible to capital outflows when central banks in developed economies start to tighten liquidity.
Expectations that the U.S. Federal Reserve will cut its stimulus program sooner rather than later has dampened appetite for emerging market assets in recent weeks.
Standard Bank economist Timothy Ash said that, despite the narrowing, the current account gap remained very significant.
“Over $160 billion in short-term external debt falls due over the next year, putting the gross external financing requirement up at around the $210 billion mark, huge both by historical and peer group comparisons,” he said.
The yield on Turkey’s 10-year bond eased to 9.12 percent from 9.23 percent at Aug. 14’s close.
Banks continued to lead
the share index higher following a strong expansion in the sector’s loan book. Reuters’
index of Turkish banking stocks has risen 2.37 percent in the last month.