Türkiye achieved its highest current account surplus in 5 years last August, supported by a significant rise in tourism revenues that helped offset the trade deficit.
The current account surplus represents the broadest measure of trade and investment flows with the outside world, and reached $4.3 billion in August, compared to a revised surplus of $778 million the previous month. Economists polled by Bloomberg had expected a surplus of $4.2 billion.
How do you achieve surplus?
The data showed that the main surplus was in the services sector, where the net surplus amounted to 8.7 billion dollars, while the goods deficit amounted to 2.9 billion dollars.
This significant improvement in current account data indicates that the restrictive monetary policies implemented by Turkey have contributed to reducing demand for foreign goods, by raising borrowing costs and reducing domestic credit growth.
Gold imports, previously a major contributor to the deficit as Turks sought refuge from inflation, also declined this year.
Restrictive monetary policies
Istanbul-based economist Haluk Burumcekci said in a note that restrictive monetary policies have had a “limited” impact so far on imports of consumer goods, noting that “the overall slowdown in imports was the result of a decline in imports of intermediate goods and capital.”
Last August, the lira was among the worst performing currencies in emerging markets tracked by Bloomberg, as a result of global market turmoil and increased demand for the dollar by local citizens, which highlighted the fragility of confidence in the local currency despite policies aimed at promoting savings in the lira.
Reserves data in August showed a decline of $2.5 billion after 3 consecutive months of growth.
Boromcekci pointed out that achieving a more sustainable path in the trade surplus requires – in addition to monetary and macro policies – taking fiscal measures to limit growth driven by domestic demand, while taking fiscal measures to reduce spending.
