 Turkey's current account deficit is expanding as a growing domestic economy pulls in imported goods, fuel and raw materials. AA photo |
Turkey’s deficit in its current account, the broadest measurement of trade, expanded to its widest in more than two decades in November as domestic demand boomed and exports languished.
The deficit was $5.9 billion, the widest gap since 1984, when the Central Bank’s data series began, compared with a $1.8 billion deficit in the same month of 2009, the Bank said on its website Tuesday.
The deficit is expanding as a growing domestic economy pulls in imported goods, fuel and raw materials. At the same time, European demand for Turkish-made goods such as cars and washing machines is weak. Last month, the Central Bank increased the money banks must set aside against consumer loans, in a bid to rein in demand and slow the widening of the deficit.
“This is the result of accelerating domestic demand and strong demand for investment from the public and private sector alike,” Şengül Dağdeviren, chief economist for ING Bank in Istanbul, said in an interview. “I think it’s early for the bank to react; they will want to see the impact of the steps they’ve already taken.”
The Bank on Dec. 16 combined increased reserve-requirement ratios with a cut to the benchmark interest rate to 6.5 percent from 7 percent. The lira has weakened 3 percent since then, making imports more expensive.
The bank acted to safeguard financial stability, because a wider deficit increases Turkey’s dependence on foreign investment to finance the shortfall, Governor Durmuş Yılmaz said Dec. 30.
The gap in the 12 months through November widened to $44.9 billion, or about 6 percent of forecast 2010 gross domestic product, or GDP. The government predicts a 2010 deficit of 5.4 percent of GDP.
The deficit was $5.9 billion, the widest gap since 1984, when the Central Bank’s data series began, compared with a $1.8 billion deficit in the same month of 2009, the Bank said on its website Tuesday.
The deficit is expanding as a growing domestic economy pulls in imported goods, fuel and raw materials. At the same time, European demand for Turkish-made goods such as cars and washing machines is weak. Last month, the Central Bank increased the money banks must set aside against consumer loans, in a bid to rein in demand and slow the widening of the deficit.
“This is the result of accelerating domestic demand and strong demand for investment from the public and private sector alike,” Şengül Dağdeviren, chief economist for ING Bank in Istanbul, said in an interview. “I think it’s early for the bank to react; they will want to see the impact of the steps they’ve already taken.”
The Bank on Dec. 16 combined increased reserve-requirement ratios with a cut to the benchmark interest rate to 6.5 percent from 7 percent. The lira has weakened 3 percent since then, making imports more expensive.
The bank acted to safeguard financial stability, because a wider deficit increases Turkey’s dependence on foreign investment to finance the shortfall, Governor Durmuş Yılmaz said Dec. 30.
The gap in the 12 months through November widened to $44.9 billion, or about 6 percent of forecast 2010 gross domestic product, or GDP. The government predicts a 2010 deficit of 5.4 percent of GDP.
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