In December of last year, Turkey recorded a deficit of $2.09 billion in its current account, marking a decrease from the previous month’s deficit of $2.77 billion, according to data from the central bank. This marks an improvement compared to December 2022, when the deficit stood at $5.91 billion.
The reduction in the deficit can be attributed to a significant decrease in the country’s primary-income deficit, which had spiked to over $1.3 billion the previous month. However, the surplus in the services sector continued to diminish.
Turkey experienced rare surpluses in its current account earlier in the year, thanks to a boost in summer tourism that brought in a substantial amount of foreign currency. However, the ongoing depreciation of the Turkish lira has resulted in domestic inflation and higher import prices, negatively impacting the trade balance. Overall, the country’s current account registered a deficit of $45.15 billion for the year, a decrease from $49.09 billion in 2022. The goods deficit remained largely unchanged at $86.56 billion.
To combat rising prices, the central bank implemented a series of interest rate cuts throughout the year, which have yielded some success. The bank anticipates a decrease in inflation from its current level of around 65% to 36% by the end of this year. They have also indicated their commitment to keeping key interest rates elevated until inflation reaches manageable levels.
It remains to be seen how Turkey will navigate its current account deficit going forward and address the challenges posed by inflation and currency depreciation.