Istanbul: Turkey had the smallest monthly current account deficit since August 2011 in June, showing progress is being made in the battle with an enduring economic weak spot and on making its economic slowdown relatively gentle.
The shortfall dived to $4.25 billion from $5.71 billion in May and $7.72 billion in the same month a year ago, central bank data showed, although the figure was slightly above a Reuters poll forecast for a deficit of $4.1 billion.
In the first six months of the year the shortfall stood at $31.08 billion, around a third lower than in the same period of 2011.
“We expect to see further improvement in the deficit, albeit at a slower pace compared to May and June, in the coming months thanks to the overall slowdown in economic activity and relatively lower petroleum price,” said Ozgur Altug at BGC partners.
Finance Minister Mehmet Simsek said the economy was experiencing a soft landing - economists’ phrase for a relatively gradual slowdown in growth that does not lead to a collapse into recession.
Imports to Turkey, which has to buy all its own oil externally, were down 1.7 per cent on the year in the first half of 2012 but any drag on the economy has been made up by robust growth of exports, helped by one off sales of gold to Iran this year.
Simsek said Turkey was also making progress in obtaining the investment it needs to finance the deficit. Direct investment in Turkey stood at $1.78 billion in June, up from $1.43b in May.
The government said last week the current account deficit would fall to around 7 per cent of GDP this year from 10 per cent in 2011 and would better the forecast in its medium-term economic programme for a shortfall of 8 per cent of GDP.
The central bank has been experimenting with a mix of policies to try to tame inflation and the current account, by dampening Turkey’s rampant domestic demand and deterring inflows of short-term capital which make the country vulnerable to external shocks.
Economists expect Turkey to grow 3-4 per cent this year, down from 8.5 per cent last year.