Turkey's current account balance remains weak

Turkey’s current account balance remains weak

Turkey's widening trade gap meant that the country's current account deficit headed deeper into red territory in June. Turkey's Central Bank (TCMB) disclosed that the country's current account deficit rose from $1.56 billion a year ago to $2.35 billion in June. For the January-June 2005 period, the current account deficit totaled $13.7 billion. The past 12 months' current account deficit reached $19.3 billion, accounting for about 5.4 percent of the country's gross domestic product. A major contributing factor to the current account deficit was once again Turkey's widening trade gap. The trade balance in June reported a deficit of $4.055 billion, largely due to a 16.3 percent increase in imports. The service sector and net foreign currency inflows partly financed the June deficit; however, factor income items caused a deficit in the current account. Long-term capital inputs, which gained momentum, indicated a positive sign for the current account balance. In addition, an even more promising factor is the rise in foreign investments. On the other hand, Turkey's debt level is still very high and the financial quality remains comparatively low. Economists expect the current account deficit to reach $20 billion by the end of the year due to the current exchange level and the rising trade deficit. Furthermore, the government revised its current account deficit forecast upwards to $15.5 billion.