Current Account Deficit to Fall Sharply

Tacirler Investment expects Turkey’s current account deficit to narrow below $1 billion in May, driven by declining gold imports and strong seasonal export performance. However, risks remain as domestic consumption goods imports continue to surge.

According to data from the Turkish Statistical Institute (TurkStat), exports in May rose by 11.4% year-on-year to $24.1 billion, while imports declined by 10.4% to $30.6 billion. As a result, the foreign trade deficit contracted by 47.8% to $6.5 billion. Excluding energy and gold, the improvement was even more pronounced, with the trade deficit narrowing by nearly $3.6 billion on an annual basis.

Türkiye’s Foreign Trade Deficit Soars to $8.2B in June

Tacirler analysts project the May current account deficit to shrink significantly, likely falling below $1 billion, marking the best reading in 20 months. This improvement is largely attributed to reduced gold imports, which fell to $1.4 billion in May from $5.4 billion a year earlier, and a significant decline in intermediate goods imports.

Moderate Rebound in Consumer Goods Imports

Despite the improvement in the overall trade balance, consumer goods imports rose to $4.5 billion in May, up from $4.2 billion the previous month. While still below the record levels observed earlier this year, the increase signals ongoing domestic demand and may pose headwinds to further rebalancing efforts.

In contrast, capital goods imports remained stable, while intermediate goods imports fell notably to $18.7 billion, down from $20.8 billion a year ago, supporting the overall positive trade outlook.

Services Income and Tourism to Support the Balance

Tacirler notes that services income, particularly from tourism, will continue to support the current account balance during the summer months. Additionally, June’s lower energy prices are expected to further ease import costs and contribute positively to the external balance.

Positive Momentum for External Balances, But Caution Remains

While the sharp contraction in gold imports and the rebound in exports are positive for the current account, Tacirler warns that persistent strength in consumer goods imports, a potential slowdown in external demand, and ongoing geopolitical uncertainties could weigh on the balance in the coming quarters.

Final Take

Assuming no major shocks to tourism or commodity prices, Turkey could achieve one of its lowest current account deficits in recent years this summer. Tacirler forecasts that the full-year current account deficit could be revised downwards if current trends continue, particularly if energy and gold imports remain contained.

Ekin Çınar
Economist, Tacirler Investment

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