Turkey's current account deficit beats expectations

Turkey's current account deficit beat expectations in May to rise to $7.75 billion in May, below the expected $7.9 billion, according to new Central Bank figures. The current account deficit in May 2010 was just $2.95 billion. The deficit for the first five months of the year rose 121 percent year-on-year to $37.3 billion, the CB said. With the deficit now running at around 9 percent of gross domestic product on a rolling 12-month basis, Garanti Yatirım Economist Gizem Oztok Altinsac said this will continue to pressure the lira downwards. "The Turkish lira saw its lowest level against a basket of currencies last November, and as of that time, the depreciation of the national currency reached 20 percent. The reason we should be afraid of a high current account deficit is a sudden stop risk, the sudden slowdown in private capital inflows into Turkey, which could lead to a devaluation in the lira," she said. Tourism revenues, an important subgroup in the service sector, rose 21.3 percent year-on-year through May to reach $6.14 billion, while spending by Turkish tourists overseas went up 17.3 percent to $2 billion. Government officials had earlier acknowledged they were aware of the risk and vowed to take necessary measures amid faster economic growth. But speaking to reporters yesterday, new Economy Minister Zafer Caglayan called the deficit an important issue but not a threat to the economy.