Turkey ran its biggest current-account deficit in at least a decade after a surge in gold imports and the cost of energy, with unexplained inflows of capital helping finance nearly half the shortfall.
(Bloomberg) —
Turkey ran its biggest current-account deficit in at least a decade after a surge in gold imports and the cost of energy, with unexplained inflows of capital helping finance nearly half the shortfall.
Balance-of-payments data published on Monday showed the gap in the current account, the broadest measure of trade and investment, widened to $48.8 billion for the full year, with gold imports accounting for $20.4 billion. The deficit in December was $5.9 billion, according to the figures published by the central bank, which was slightly wider than forecast by economists.
Net errors and omissions, or capital of unknown origin, declined for another month but still reached $24.2 billion in the full year after hitting a record in mid-2022.
An imbalance between imports and exports has grown worse last year after Turkey’s energy bill doubled as the cost of commodities spiked after Russia’s invasion of Ukraine. Growing gold purchases also emerged as a huge drag on Turkey’s external finances, as investors turned to bullion as a hedge against sharp declines in the lira and inflation at the fastest in over two decades.
The net errors and omissions component was instrumental to funding the deficit, with money from unknown origins rising to the highest in data going back to 2006. The inflows helped shield the central bank’s reserves during a year when it spent as much as $108 billion on backdoor currency market interventions to support the lira, according to Bloomberg Economics.
Central bank Governor Sahap Kavcioglu said last month a surge in gold purchases in the second half of 2022 had contributed to the current-account shortfall and that Turkey would have run a surplus if energy and bullion imports are excluded.
Goldman Sachs Group Inc. economists estimate that around 40% of Turkey’s gold imports in last year were “likely driven by central bank purchases” and the rest “reflected further loss of confidence in the lira and the public’s limited access to other investment assets with real buffers.”
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