Turkey’s current account swung to $2.68 billion deficit in November

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Turkey’s current account recorded a deficit of $2.68 billion in November as expected, official data showed on Tuesday, flipping into the red after three months of surplus in which the government adopted a policy it says will address the shortfall, Reuters reported.

The current account has improved from a deficit of $36.72 billion in 2020 and is expected to have ended 2021 at around $15 billion, according to recent Reuters polls.

The January-November cumulative deficit stood at $10.82 billion, according to the central bank data, which covered the period just before a volatile lira crash and recovery in December.

Goldman Sachs said the deficit in November was due to a sharp rise in imports and the seasonal fall in tourism.

“(We) expect the current account deficit to widen in 2022 as the improvement in the tourism sector only partially offset a higher energy import bill,” it said.

In recent months, authorities have described Turkey’s chronic current account deficits, largely due to energy and other imports, as a key problem facing the economy.

To tackle it, the government unveiled a so-called new economic program aimed at slashing interest rates to boost exports with a competitive exchange rate, even as inflation soared to 36 percent last month.

The central bank, under pressure from President Recep Tayyip Erdoğan, cut rates by 500 basis points since September to 14 percent, sparking a crisis for the currency which lost 44 percent of its value last year. In turn, inflation hit its highest in 19 years.

“With the sharp depreciation in the lira, domestic demand and imports will likely follow a weaker course, leading to a somewhat better current account performance,” Goldman Sachs said.

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