Türkiye hails $100B services export mark, narrowing current account gap

Trade Minister Ömer Bolat on Wednesday hailed the fact that Türkiye managed to exceed the $100 billion mark in services exports for the first time ever in 2023, as he noted an improvement in the country’s current account balance due to the narrowing trade gap.

Bolat’s remarks came a day after the balance-of-payments data published on Tuesday showed the country’s current account balance ended 2023 with a lower-than-expected deficit of nearly $2.1 billion (TL 64.52 billion) in December.

The shortfall in 2023 as a whole came in at $45.2 billion, according to the data by the Central Bank of the Republic of Türkiye (CBRT).

Bolat attributed the improvement in the balance to a decrease in the trade deficit as of the second half of last year.

The current account is the most complete measure of trade because it includes investment flows and trade in merchandise and services. A deficit means Türkiye is consuming more from overseas than it is selling abroad.

Narrowing the 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 surged from $7.2 billion in 2021 to $48.8 billion in 2022.

“Service exports have reached the $100 billion mark for the first time. There has been a significant improvement in the current account balance due to the decrease in the trade deficit in the second half of 2023,” Bolat wrote on social media platform X, formerly known as Twitter.

“It is expected that the decline in the current account deficit will continue in 2024,” Bolat said.

Analysts also described the latest data as a significant improvement that is likely to continue this year, propelled by a decrease in the trade gap and an increase in tourism revenues.

Bolat said the shortfall declined by $14.9 billion from $60.1 billion in May, highlighting a positive trend in the annualized current account deficit since last July, as Türkiye reversed its policy sharply and delivered aggressive interest rate hikes.

The shift is aimed at taming inflation, which runs at nearly 65%, reducing chronic deficits, rebuilding foreign exchange reserves, and stabilizing the Turkish lira.

Bolat cited the impact of a 43.2% decline in the foreign trade gap to $4.6 billion in December. He also noted that travel revenues, which fall under services, renewed their record to reach $48 billion.

“In line with the export strategies we have implemented and the support we provide to increase both goods and service exports, as well as our import policies aimed at protecting domestic producers against unfair competition, we continue our efforts in collaboration with our stakeholders to ensure the sustainability of the positive trend observed in the current account balance,” said the minister.

“Our goal is to strengthen the necessary macroeconomic stability for permanent improvement in the current account balance and sustainable increase in prosperity.”

The 2023 deficit amounted to 4.1%-4.2% of gross domestic product (GDP), down from 5.4% a year earlier.

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%.