The current account posted a +USD2.6bn surplus in August which compares to a -USD0.9bn deficit a year ago. The first monthly surplus in almost three years reduced the 12-month rolling current account deficit to -USD51bn (down from a -USD58bn peak in May 2018) though this still accounts for about -7% of annual GDP. As we expect in our hard landing scenario for Turkey (see also our Insight Turkey), a rebalancing in the tradeable sector after the sharp TRY depreciation (-34% loss in value YTD) is underway. Imports of goods collapsed by -22% y/y and imports of services by -11% in August. Exports of goods fell by a much lower rate of -7% y/y and should, going forward, benefit from the more competitive currency. Exports of services even grew by +8% in August thanks to rising tourism as tourists enjoy now significantly more affordable holidays in Turkey. However, the other side of the coin is that portfolio investment recorded the seventh consecutive month of net outflows in August, at -USD1.8bn, taking the YTD net outflows to -USD2.2bn. And the Central Bank’s foreign exchange reserves dropped by
-USD8.1bn in August, followed by -USD4bn in September, now standing at USD66bn (-29% y/y) and covering less than three months of imports.
