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Türkiye’s Current Account Deficit Narrows Sharply in May

TL

Türkiye’s current account deficit (C/A) declined significantly to USD684 million in May, outperforming both the USD800 million forecast and the USD825 million median market expectation. This marks a sharp improvement from April’s USD7.9 billion shortfall, thanks to a halved foreign trade deficit and a boost in tourism revenues.

Trade and Tourism Drive Improvement

The foreign trade deficit dropped from USD12.1 billion to USD6.6 billion, while tourism revenues rose from USD3.1 billion to USD4.4 billion, helping narrow the overall external imbalance. For comparison, Türkiye recorded a USD591 million deficit in May 2024.

The 12-month rolling C/A deficit remained relatively flat, increasing only slightly to USD16 billion, now just 1.2% of GDP, down drastically from USD56 billion (5.5% of GDP) in May 2023.

Official Reserves Rebound by USD13.5 Billion

Following a sharp USD40 billion drop in March–April, Türkiye’s official reserves recovered USD13.5 billion in May. This recovery was supported by a USD14.1 billion capital account surplus, including a USD1.3 billion positive net errors & omissions item.

Key drivers of the inflow:

  • USD4.8 billion returned via Turkish banks’ correspondent accounts abroad, a partial reversal of the USD8.4 billion March outflow.

  • A net USD2.1 billion increase in private sector loans, after a sharp USD9.4 billion outflow in April.

  • USD3.9 billion in portfolio inflows, including:

    • USD2.6 billion into government bonds,

    • USD0.9 billion into Eurobonds,

    • USD0.4 billion into equities.

  • A USD2.5 billion increase in non-resident deposits in Turkish banks.

June Deficit Set to Rise But Remains Manageable

Preliminary trade data points to an USD8.2 billion trade deficit in June, suggesting a C/A deficit close to USD1.5 billion for the month, despite robust tourism activity. Since June 2024 posted a USD830 million surplus, the rolling 12-month deficit could exceed USD18 billion next month.

Still, analysts expect the current account to remain moderate, forecasting an end-year deficit of USD22 billion (1.5% of GDP). Risks include:

  • U.S. tariff policy changes,

  • Global commodity prices,

  • Fluctuations in global economic growth.

These factors could shift Türkiye’s external position in either direction.

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