The current account deficit (CAD) increased by 18 percent and reached almost $38 billion (see table below). Although the CAD is still increasing significantly year on year, the rate of increase declined below 20 percent for the first time since 2002. In fact, the rate of CAD increase was 429 percent in 2003, 94 percent in 2004, 44.5 percent in 2005 and 42.4 percent in 2006. After the relatively good 2007 performance, the CAD share in the gross domestic product (GDP) is estimated to have been 7.5 percent in 2007, a figure which was nearly 8 percent in 2006.
This should be viewed as a considerable success, reflecting the quality of structural change in export-oriented manufacturing industry. We must also add that the domestic currency, which has been overvalued for the last four years, constitutes a negative factor for the industry's competitive strength. As is seen from the figures given below, the rate increase for exports was significantly higher than that for imports. The annual export increase rate was 25.3 percent and the same figure for imports was 23 percent. This is also reflected in the foreign trade gap. The trade deficit's increase rate was just 16.6 percent, the lowest rise since 2002.
On the financing front, the flow of foreign direct investments (FDI), which reached $20 billion, the highest figure ever recorded in Turkey, still continues to finance almost half of the CAD (see table below). Our projection for FDI to finance the CAD in 2008 is to be realized around at least 60 percent, provided that the global economic slowdown does not convert into a lasting recession and privatization efforts of Turkey in energy and banking industry towards public sector banks would continue on track.
In my view, 2007 was a considerably a good year in terms of balance of payments and trade performance.
