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Turkey’s current account likely to record rare surplus in June: report

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Turkey’s current account is expected to record a rare surplus of $426 million in June due partly to tourism and lower energy bills, a Reuters poll showed on Monday, while the deficit is forecast to be $41 billion for the full year of 2023.

The June estimate is based on the median response of 14 economists whose poll forecasts ranged from a $1.1 billion surplus to a $1 billion deficit.

Turkey’s trade deficit, a major component of the current account, declined 37.3 percent year-on-year in June to $5.16 billion, data showed.

The median forecast of six economists for the current account deficit for the full year of 2023 was $41 billion, with estimates ranging between $38 billion and $50.8 billion.

“We expect the current account balance to improve sharply to a surplus in June on seasonal factors (including) a lower energy import bill and high tourism income, (and) monetary tightening that started after the elections,” Goldman Sachs said in a note.

Since June, the central bank has hiked its policy rate to 17.5 percent from 8.5 percent and pledged further tightening to fight inflation, while the government has introduced tax and fee hikes to boost budget income.

“We are seeing the first signs of this tightening in June BoP but risks remain,” Goldman told clients.

“Although the upward tax adjustments and the slowdown in loan growth are likely to offset this going forward, we think the gradual unwinding of macroprudential measures and the uncertainty around the funding of the budget can undermine the (central bank’s) ability to continue tightening.”

In recent years, President Recep Tayyip Erdoğan’s unorthodox policies – including sharp interest rate cuts in the face of inflation – led to a currency crisis, which stoked prices and sent inflation to a 24-year high of 85.5 percent last year.

But after his May re-election victory, Erdoğan named a new cabinet to undertake an economic policy U-turn, and the government is expected to update its economic forecasts for the next three years in September.

The central bank is scheduled to announce June current account data at 0700 GMT on Aug. 11.

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