The central bank announced balance of payments data on Monday. According to its figures, the monthly CAD dropped by nearly 13 percent to $6.57 billion in December of last year, down from $7.53 billion observed in the same month a year earlier.
The reduction was a result of fiscal and monetary measures taken to tackle the issue as well as a weaker national currency.
The bank had adopted an unconventional policy mix of lower interest rates and higher required reserve ratios to make Turkey less attractive for highly volatile short-term international capital inflow, while at the same time making it more difficult for consumers to take out loans from Turkish banks to tame credit expansion throughout the year. The measures were coupled with government action taken late last year by the executive branch to substantially raise the private consumption tax (ÖTV) on certain -- mostly imported -- products such as cars and cell phones.
As these developments were taking place, the Turkish lira continued to weaken against major currencies. The US dollar was worth TL 1.83 at the beginning of the 12th month last year, but it increased to over TL 1.89 before the month ended, granting Turkish goods a price advantage over foreign ones in international markets while making imported products much less attractive for consumers at home.
