Turkey: Annual current account balance still in surplus

The February current account deficit stood at US$1.6 billion, mainly on the back of a deficit in the goods balance (-US$1.9bn) and contribution from the primary income balance (-US$0.7bn) despite a surplus in services (US$1.5bn) and secondary income balance (US$0.1bn).

Accordingly, the 12-month rolling current account balance remained with a US$6.1bn surplus, though it declined from the previous month's US$7.2bn surplus. This indicates that the external balance is still on a modest deteriorating trend after a significant improvement until the last quarter of 2019.

On the capital account, February showed US$3.1bn inflows, mainly on the back of locals’ reducing their assets held abroad by US$2.3bn. This is mainly driven by banks cutting their deposit holdings outside of Turkey by US$3.2bn. With the current account deficit and net errors & omissions at +US$0.6bn, official reserves rose by US$3.0bn.

In the breakdown, debt creating flows increased by US$1.3bn despite falling trade credits and a total US$0.6bn debt repayment by banks and corporates. This is attributable to 1) foreign banks’ depositing US$1.2bn and 2) the Treasury’s US$4.0bn Eurobond issuance vs a US$1.8bn repayment.

In February alone, the long-term rollover ratio for banks was at 77% vs 65% of corporates, while the ratios were 73% and a healthy 90%, respectively on a 12-month rolling basis.