Turkey’s higher-than-expected current account deficit

Turkey's current account posted a deficit of US$4.0bn, higher than the market forecast and our call at US$3.5bn. A closer look at the monthly figures shows the deficit widened by roughly US$1.2bn compared with the same month in 2024, primarily due to a larger trade gap, which increased from US$-5.2bn to US$-6.4bn.

This deterioration was primarily driven by the core trade surplus turning to a deficit and a worsening balance in primary income. However, the lower energy deficit limited the deterioration in the current account balance.

As a result, the 12-month rolling current account deficit, which began rising in November of the previous year, continued its uptrend and reached US$23.2 bn, or approximately 1.6% of GDP, up from US$22.0 bn a month ago.

On the capital account side, inflows remained weak in November at US$1.2bn. With net outflows from errors and omissions of US$1.9bn, and considering the current account deficit, official reserves contracted by US$4.8bn.

Further analysis reveals that resident activities generated an outflow of US$1.6bn, mainly due to the acquisition of financial assets abroad by corporates. On the flip side, non-resident activity led to inflows totalling US$2.7bn, primarily from debt-related channels. Accordingly, despite a US$2.2bn fall in foreign deposits in local banks, a US$4.1bn net borrowing turned out to be the major contributor to a positive capital account. In the breakdown, banks’ long-term borrowing reached US$1.5bn, while corporate borrowing was also strong, at US$2.0 bn, of which US$1.7bn was long-term. Consequently, long-term debt rollover ratios stood at 175% for corporations and 144% for banks, compared with 181% and 185%, respectively, on a 12-month rolling basis.

During the first eleven months of 2025, resident outflows rose to US$33.5 bn in 2025 from US$31.8bn. Foreign inflows, on the other hand, increased to US$52.3bn, compared with US$48.5bn in the same period in 2024. As a result, the capital account has remained on the positive territory with US$18.6bn, compared to a US$16.6bn a year ago.

In addition, outflows via net errors and omissions remained elevated, totalling US$-18.0 bn vs US$-8.8 bn in 2024. Taken together with the widening current account deficit, which grew from US$-5.7bn to US$-18.5 bn, official reserves were depleted by US$17.9bn vs a slight US$2.1bn increase recorded a year earlier.