ECONOMY

Turkish account troubles

ISTANBUL – Turkey’s current account gap, seen as the economy’s weak spot, is expected to have swelled 60 percent year-on-year in April, pulled wider by high oil prices and the demand for imports fueled by strong growth, a poll showed. The current account deficit, one of the biggest in emerging markets, makes Turkey more vulnerable to changing investment flows which fund the deficit and was one reason Turkish assets were hit particularly hard by a global sell-off last month. But a 15 percent slide in the value of the lira in May will likely tighten the current account deficit in the second half of the year by making Turkish goods more competitive and reining in demand for foreign products. A Reuters poll of 27 economists put the April current account deficit at a median $4.1 billion (3.2 billion euros), compared to $2.5 billion (1.9 billion euros) this time last year. The trade deficit, the most important component of the current account, swelled 50 percent in April to a record $5.2 billion (4 billion euros), data released on Wednesday showed, with record-high oil prices hurting oil importer Turkey’s finances. Consumer goods imports rose almost 32 percent year-on-year in the first four months of the year, driven by strong economic growth. The government said last month it saw 2006 growth at 6 percent, above an initial 5 percent target. But economists expect an improvement in the deficit after the lira’s slide – partly on the back of slower economic growth – while tourism receipts could also help the shortfall. «We expect a correction in the current account from the rise in the exchange rate. We could see this in the second half of the year, starting from June,» HSBC economist Esra Erisir said. «Despite the government’s upward revision to growth, we expect a slowdown and this could reduce the deficit.» The lira’s weakness will slow demand for consumer goods and later for investment goods and will make Turkey more competitive as a tourist destination. The goverment was aiming for a 2006 current account deficit of 5.77 percent of gross national product, but has revised that up to 7 percent. In the first quarter, the current account deficit rose 39.2 percent to $8.622 billion (6.684 billion euros). The central bank is due to release the data between June 5 and June 9.