February current account deficit soars 126.7 pct
Turkey's current account deficit (CAD), a structural burden on the country's shoulders, jumped 126.7 percent in February over the second month of last year to $6.12 billion, the Central Bank of Turkey announced on Monday.
Turkey's current account deficit was $2.7 billion in February 2010. The CAD reached TL 48.56 billion in 2010. As earlier discussed by observers, Turkey needs an inclusive economic reform plan, including a coherent energy plan and increasing productivity levels, before it can address its CAD problem. Government officials have earlier acknowledged they were aware of the risk and vowed to take necessary measures while the country's economy is growing at a fast rate.
Turkish Confederation of Businessmen and Industrialists (TUSKON) President Rızanur Meral said all parties should shoulder the responsibility to help weather Turkey’s CAD problem. “This is not an issue that can only be solved by the government. … We have to establish social awareness on this problem so a permanent solution can be achieved,” he explained.
Also speaking on the issue to on Monday, the Independent Industrialists and Businessmen’s Association (MÜSİAD) President Ömer Cihad Vardan said the CAD crisis was “solvable.” Attributing the increase in the CAD to a jump in imports, Vardan said, “The state coffers have enough to finance the CAD to a greater extent.”
The balance of payments report by the Central Bank cited a high foreign trade deficit as the major factor responsible for the 126.7 percent surge in February’s CAD, reiterating a structural problem in the trade deficit. Turkey’s foreign trade deficit -- which traditionally arises predominantly from an import dependency on energy and intermediate goods, especially oil and natural gas -- rose by 110.9 percent in February over the same period last year, amounting to $7.4 billion.
Earlier estimations of the February CAD stood at $6.35 billion. The total CAD in the first two months amounted to $12.07 billion, representing a $5.7 billion rise when compared to January-February period of 2010.
Tourism revenues, an important subgroup in the service sector, increased 17.4 percent in February over the same month of 2010, reaching $1.7 million, while spending by Turkish tourists overseas rose 32.5 percent, to $786 million. According to the data, net tourism income increased 7 percent to $923 million in January-February 2011, compared to the same months of a year before. Meanwhile, transportation logged a net outflow of $135 million in the first two months of the year.
The income account, consisting of the compensation of employees and investment income, recorded a net outflow of $1.09 billion in February 2011, reflecting a $189 million decrease over the same month of 2010. Direct investment, portfolio investments and other types of investment, including interest income and payments, all of which comprise the main sub-item under investment income, recorded a net outflow of $184 million, $396 million and $486 billion, respectively, in February 2011.
The interest payments for long and short-term loans saw a decline of 31.9 percent, to $636 million in the first month of this year over February 2010.
Net capital inflows in January-February 2011 increased to $6.57 billion from $3.75 billion in the same months of last year, a strong rise of 75.2 percent.
Portfolio investments in Turkey, which logged a net outflow of $290 million in January-February 2010, also showed a net inflow of $3.78 billion in the first two months of 2011. In terms of foreign direct investments (FDI) first two months saw a net capital inflow of $215 million.