Turkish current account continues to widen

In January, Turkey's current account registered a deficit of $3.8bn, exceeding both the market consensus of $3.2bn and our estimate of $3.5bn. A detailed analysis of the monthly data reveals that the higher deficit, compared to the same month last year, can be attributed to two main factors:

• A smaller surplus in the core trade balance (excluding gold and energy), which stood at $0.6bn, down from $1.8bn.
• A larger deficit in the primary income balance, which increased to $1.2bn from $0.9bn.

As a result, the 12-month rolling current account deficit, which began widening in November last year, grew to $11.5bn (approximately 0.9% of GDP), compared to $10.0bn at the end of 2024.

On the capital account side, there were inflows amounting to $11.8bn, significantly outpacing the monthly current account deficit. Despite net errors and omissions resulting in $1.6bn of outflows, official reserves expanded by $6.4bn in January.

A deeper look into the monthly data shows that residents’ activities caused $1.4bn in outflows. These were driven by outward foreign direct investments (FDI), portfolio investments, increased deposits abroad, and extended credits. In contrast, non-resident activities resulted in inflows of $13.2bn, primarily from debt-creating sources. These foreign inflows consisted of:

• Inward FDI amounting to $1.1bn.
• Purchases in the bond market totaling $2.3bn.
• Net borrowing by banks of $11.2bn, of which $7.3bn was short-term borrowing. Consequently, the long-term debt rollover rates were 132% for corporations and 520% for banks, compared to the respective rates of 126% and 148% on a 12-month rolling basis.