Türkiye ended 2023 with a lower-than-expected current account deficit of nearly $2.1 billion (TL 64.52 billion) in December, according to official data on Tuesday that analysts described as a significant improvement that was likely to continue this year.
Narrowing the current account gap and reaching a surplus were among the main goals of President Recep Tayyip Erdoğan's economic plan in recent years. However, sharply rising oil, gas and grain prices after Russia's invasion of Ukraine caused it to widen until mid-2023.
The deficit in 2023 as a whole came in at $45.2 billion, the data by the Central Bank of the Republic of Türkiye (CBRT) showed on Tuesday.
The shortfall exceeded Türkiye's medium-term program forecast of $42.5 billion but came in below a Reuters poll forecast of $46.9 billion.
The deficit surged from $7.2 billion in 2021 to $48.8 billion in 2022, driven mainly by escalating imports, fueled by soaring energy prices following Russia's invasion of Ukraine.
The December gap of $2.091 billion was well below the poll forecast of $3.3 billion and a November deficit of $2.77 billion.
QNB Finansbank said the divergence from the forecast seemed to be mainly related to a lower-than-expected deficit in the primary income account, mainly due to investment income.
Excluding gold and energy imports, the current account balance recorded a surplus of $4.1 billion, up from $3.4 billion a year earlier, the central bank data showed.
The goods deficit was at $4.58 billion, while services recorded a surplus of $2.57 billion. The travel item, under services, posted a net inflow of $1.7 billion.
Primary income recorded a net outflow of $233 million, whereas secondary income indicated a net inflow of $154 million.
Direct investments saw a net inflow of $317 million in December, the central bank said.
The 2023 deficit amounted to 4.1%-4.2% of gross domestic product (GDP), down from 5.4% a year earlier.
Economists attributed the decline to a policy shift after the May elections and the decrease in energy prices.
In a U-turn after years of easing policy, Türkiye delivered aggressive interest rate hikes since last June as part of policies aimed at taming inflation, reducing chronic deficits, rebuilding foreign exchange reserves and stabilizing the Turkish lira.
Economists expect the improvement to continue in 2024, propelled by a decrease in the trade deficit and an increase in tourism revenues, which hit a record of $54.3 billion last year.
The government's medium-term program, announced in September, forecasts a gap of $34.7 billion by the end of 2024. The deficit-to-GDP ratio is projected to fall to 3%.
The Reuters poll forecasts a full-year current account deficit of $35.7 billion.
QNB Finansbank on Tuesday lowered its estimate for the 2024 shortfall by $5 billion to $30 billion. The adjustment implies a reduction of the deficit to 2.5% of GDP.
It said monthly deficits are expected to remain high at around $4 billion in the coming months, reflecting seasonally low tourism revenues.
"However lower energy prices, lower gold imports and a slowdown in economic activity would lead to an improvement over last year," it added, lowering its 2024 deficit forecast by $5 billion to $30 billion, or 2.5% of GDP.
Meanwhile, the central bank on Tuesday said it made several adjustments to the balance of payments statistics, which narrowed the net errors and omissions item, as part of its end-of-year revisions.
It announced various updates, particularly concerning the services balance, primary income balance, direct investments, portfolio investments and other investment items since 2019.
"As a result of the aforementioned revisions, the 'Net Errors and Omissions' item has been revised by $176 million in 2019, $253 million in 2020, $419 million in 2021, $258 million in 2022 and $434 million in January-November 2023," the statement said.
