Bloomberg News

Turkey September Current-Account Gap Widens to $6.8 Billion

November 15, 2011

(Updates with comment from economist in fourth paragraph.)

Nov. 15 (Bloomberg) -- Turkey’s current-account deficit widened in September, an expansion the central bank said has been brought under control as of last month.

The shortfall grew to $6.8 billion from $3.9 billion a year earlier, the bank said in a statement on its website today. It widened from $4 billion a month earlier. The median estimate of five economists surveyed by Bloomberg was $6.7 billion.

Bank Governor Erdem Basci said yesterday that a weaker lira and slowing economy have brought the widening in the gap under control since October. The deficit, about 10 percent of output, makes Turkey vulnerable to swings in external investment sentiment and is the biggest obstacle to the country achieving an investment-grade credit rating, according to companies such as Standard & Poor’s and Moody’s Investors Service.

“The worst in terms of the 12-month rolling deficit is nearly over, probably the peak will be in October,” Inan Demir, chief economist at Finansbank AS in Istanbul, said by e-mail. The Ankara-based central bank “was counting on a more rapid improvement in the deficit, but they seem to have toned down somewhat regarding the pace of improvement.”

The cumulative deficit in the 12 months through September rose to a record $77.5 billion, the central bank said today. Basci told Cabinet ministers yesterday that the quality of financing for the shortfall is rising and its expansion will be “under control” in the last three months of 2011, according to a presentation posted on the bank’s website.

Domestic Demand

On Aug. 11, Basci forecast a “rapid and sizable” reduction in the deficit in the second half of the year.

“Unnecessarily strong domestic demand” combined with high oil prices and falling exports to Middle Eastern countries hit by unrest have all combined to widen the deficit this year, Finance Minister Mehmet Simsek said. “As domestic demand softens, the speed of the widening in the gap will slow,” he said in televised remarks to journalists in Ankara today.

Government plans announced on Oct. 13 show the deficit exceeding 7 percent of gross domestic product for the next three years. The plans, which cover 2012 to 2014, forecast the economy will grow 4 percent next year.

“We remain concerned that the current policy mix isn’t sufficiently ambitious to tackle the country’s wide current- account deficit,” Ilker Domac, an economist in Istanbul for Citigroup Inc., wrote in an e-mailed report. “The government remains reluctant to forgo growth.”

--Editors: Jennifer M. Freedman, Heather Langan

To contact the reporter on this story: Steve Bryant in Ankara at

To contact the editor responsible for this story: Andrew J. Barden at

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