Macro Focus: CA surplus continued for the second month in a row

In September, the CA posted a monthly surplus of USD1.7bn (Consensus: USD +1.3bn, YF: USD +1.3bn). This was the second monthly surplus in a row. CA posted a USD2.3bn of deficit in the same month of the previous year. The main drivers of a USD4bn of YoY improvement in the current account were USD2.7bn of drop on the foreign trade deficit (USD-1bn) and USD1.9bn of rise on the net service revenues (USD+3.7n).

On the other hand, total net primary and secondary deficit increased by USD668mn to USD999mn. Normalization trend on gold imports continued. In September, net net non-monetary gold exports was USD-256mn (Sep.20: USD-3.3bn). However, net energy deficit increased by USD1.3bn YoY to USD3.7bn. Accordingly, core figures (excluding gold and energy) indicated a USD5.6bn of surplus (Sep.20: USD+3.3bn). Therefore, 12-month CA deficit decreased from USD22.4bn in August to USD18.4bn in September whereas 12-month core surplus increased from USD19.7bn to USD22bn.

Net error-omissions and Treasury’s Eurobond issuances were key financing items in September. FDI recorded a net inflow of USD1.1bn whereas portfolio investments recorded a net inflow of USD1.2bn. Non-residents were net buyers in equity by USD62mn whereas net sellers in GDDS markets by USD189mn, respectively. Regarding the bond issues in international capital markets, banks and Treasury realized net borrowings of USD26mn and USD2.3bn, respectively. On the other hand, other sector made net repayments of USD408mn. Other investments recorded a net outflow of USD122mn.

Banks’ currency and deposits within their foreign correspondent banks decreased by USD760mn and nonresident banks’ deposits held within domestic banks decreased by USD373bn. Regarding the loans provided from abroad banks and government realized net repayments of USD745mn and USD131mn, respectively whereas other sectors realized net borrowing of USD540mn. Net errors-omissions recorded a net inflow of USD1.8bn.The official reserves increased by USD5.6bn.

We revised our year-end CA deficit forecast to USD16.5bn from USD22.5bn. In 9M21, current account (CA) deficit was USD11.7bn (9M20: USD-28.3bn). According to a yearly comparison on 9-month figures, foreign trade deficit narrowed by USD9bn to USD20.3bn whereas net service revenues increased by USD9.1bn to USD16.9bn. Net gold imports decreased by USD13.7bn whereas net energy imports increased by USD7.5bn in 9M21 compared to the same period of the previous year. Hence, the net contribution from the gold and energy imports was USD6.1bn.

Net travel revenues increased by USD7.2bn in the same period. Core surplus (excl. gold and energy) rose by USD10.4bn to 16.7bn. Strong upward trend in exports, normalization in gold imports and the strong progress in the vaccination program stimulating tourism activities were shown as the main drivers of the improvement on year-to-date figures.

Leading foreign trade figures for October indicated that trade deficit was lower than USD 936mn than the perivous year (Oct.21: USD-1.5bn, Oct.20: -2.4bn). Hence, improvement trend on 12-month CA figures could continue in October. On the other hand, we should also note the financing structure (low FDI inflow vs high net error-omissions inflow) CA deficit seems unhealthy. The government expects USD 21bn of CA deficit in 2021 according to 2022-2024 Medium Term Program. According to the current realizations and trends, this figure seems achievable. Hence, we revised our annual CA deficit forecast to USD16.5bn (refers to -2.2% of GDP) from USD 22.5bn (refers to -2.9b% of GDP). Turkey’s CA data of October would be announced on December 13.


Y.F. Securities Research