Turkey Current Account Deficit Hits $37.3B in May: Structural Imbalance Intensifies?

According to Turkey's Central Bank (TCMB), the current account deficit in May stood at $1.459 billion, while the balance excluding gold and energy reached $3.626 billion. The payment-based current account deficit hit $4.34 billion, with annualized data showing a current account gap of $37.3 billion and a trade deficit of $74.4 billion. Service revenues, driven by transport and tourism, totaled $5.207 billion, highlighting resilience in non-traditional sectors.

Investment Outflows and Financial Pressures

May saw $455 million in direct investment outflows, with foreign investors purchasing $184 million in Turkish real estate and domestic investors acquiring $143 million abroad. Portfolio outflows reached $3.69 billion, signaling continued capital volatility. However, TCMB reserves declined by $32.3 billion, underscoring foreign exchange strain amid these flows.

Dual Dynamics of Financial Flows

■Direct investments contributed $1.8 billion and portfolio inflows added $5.3 billion, supported by $46.7 billion in loans and $200 million in commercial credit.

■Net effective and deposit outflows of $18.8 billion offset some positive impacts, while foreign bank deposits in Turkey surged by $3.529 billion, indicating partial stability.

■External borrowing by Turkish sectors totaled $3.408 billion, with government debt repayments of $180 million reflecting fiscal discipline pressures.

Fatih Kılıç: May's figures reinforce Turkey's structural imbalances. Strong service revenues contrast with investment outflows and reserve depletion, potentially fueling short-term FX pressures and inflationary dynamics. Policymakers face a tightrope walk between stabilizing reserves and sustaining growth.