Turkey logs $674M account surplus, breaking 20 month deficit

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Turkey logged a current account surplus in June for the first time in nearly two years, official data released on Friday showed, largely thanks to increasing tourism revenues and declining energy imports.

The country recorded a $674 million current account surplus in June, Turkey’s Central Bank said Friday, in a reversal from account deficits of $3.4 billion in the same month last year and $7.9 million in May 2023. Friday’s figure marked the first account balance surplus since October 2021. Increasing tourism revenues and declining energy imports, which are one of the largest items in Turkey’s import costs, have been the major driver in the shift.

Data on Friday showed that Turkey’s net tourism revenues reached more than $4.2 million in June in addition to exports worth some $20.9 billion in the same month.

Excluding gold and energy, the current account recorded a net surplus of $5.58 million, the bank said.

The country’s trade gap narrowed sharply by some $7 billion from $10.5 billion in May to $3.7 billion in June, the data showed.

Speaking on Friday, Turkey’s Vice President Cevdet Yilmaz said that curbing the country’s foreign trade deficit would be one of the top three priorities of his government’s medium-term economic program, which will be unveiled in September. He also listed structural reforms and lowering Turkey’s breakneck inflation to single digits as the top priorities.

Turkey’s annual inflation, which reached a 24-year high of 85.5% in October, stood at 47.83% in July, with monthly consumer prices increasing by 9.49% in July, according to official data. Turkish President Recep Tayyip Erdogan’s unconventional economic policy of keeping interest rates low in a bid to boost economic growth was the main driver of the skyrocketing inflation. Turkey’s Central Bank kept its policy rates in single-digit territory despite the Turkish lira sinking to record low levels, fueling the country’s cost of living crisis.

Erdogan abandoned his unorthodox economic policy, which is widely blamed for Turkey’s foreign currency crunch and wider crisis, after his election in May, tapping mainstream economists to helm the country’s finance management.

Under its new governor, Hafize Gaye Erkan, Turkey’s Central Bank raised the country’s interest rates by 900 basis points in successive hikes in June and July, from 8.5% to 17.5%.

Erkan, the bank’s first ever female governor and a former Wall Street executive, pledged earlier this month to continue a gradual tightening of monetary policies.

The bank’s net foreign reserves, which fell below zero just before the May general elections, rose to $15.7 billion over the past two months, Turkey’s Finance Minister Mehmet Simsek announced Thursday.

“We are committed to maintaining rule-based market-friendly policies,” Simsek tweeted.

Ezgi Akin

Source:Al-Monitor

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