Türkiye expects wider current account gap due to higher energy costs

Türkiye expects its current account deficit to widen this year due to high energy and non-energy commodity prices, Treasury and Finance Minister Mehmet Şimşek said on Wednesday.

But, Şimşek said, the deterioration is likely to remain temporary and manageable thanks to stronger macroeconomic fundamentals and policy gains.

His remarks came after Wednesday’s official data showed Türkiye registered a current account deficit of $9.6 billion in March, mainly due to a higher trade gap.

The figure was in line with market expectations but still marked the highest monthly gap in three years.

Türkiye’s external balance has been in focus due to the country’s heavy reliance on imported energy, whose prices spiraled due to the Iran war that has effectively shut the key Strait of Hormuz.

Excluding gold and energy, the current account deficit stood at $3.9 billion in March, the Central Bank of the Republic of Türkiye (CBRT) said. Goods recorded a gap of $9.5 billion, while services posted a surplus of $2.6 billion.

On annualized terms, the shortfall totaled $39.7 billion, or approximately 2.6% of gross domestic product (GDP).

The goods deficit recorded as $77.8 billion, while services recorded a net surplus of $63 billion. The primary and secondary income realized a net deficit of $23.8 billion and $1.1 billion, respectively.

Şimşek said elevated global commodity prices would put pressure on the external balance, but emphasized that the government’s economic program had improved resilience against such shocks.

“This year, the current account deficit will increase due to the high course of energy and non-energy commodity prices,” he wrote on the social media platform X.

“Thanks to the gains achieved through our program and strengthened macroeconomic foundations, we assess that this increase will remain at manageable levels and be temporary.”

The minister noted that the annualized current account gap was expected to decline significantly in April, supported by an improvement in the foreign trade balance.

However, he warned of a temporary deterioration in May, citing the impact of an extended public holiday period that is likely to disrupt economic activity.

“At the same time, we observe that the war’s impact on tourism revenues has remained limited,” Şimşek said

Tourism is a critical component of Türkiye’s external financing, helping offset part of the country’s structural energy import bill.

Şimşek also noted that direct foreign investment inflows totaled $1 billion in March, bringing annualized foreign direct investment to $12.6 billion.

He said Türkiye’s sovereign risk premium, measured by credit default swaps (CDS), had moved closer to pre-war levels, while debt rollover ratios remained strong.

“Our country’s risk premium is approaching pre-war levels, while the high trend in debt rollover ratios continues,” Şimşek said.

He added that the new investment incentive package currently under discussion in Parliament was expected to strengthen Türkiye’s financing structure and support long-term capital inflows.

“We continue policies that reduce external energy dependency while supporting value-added production and the green transformation,” he said.

DAILYSABAH