Türkiye looks at reserve buildup as current account gap narrows

Türkiye seeks to reduce its current account deficit to below 2.5% of the national income this year and help accumulate reserves, the country’s economy chief said on Friday.

Treasury and Finance Minister Mehmet Şimşek’s remarks came a day after official data showed the country’s foreign trade deficit fell more than 41% in the first quarter of this year to $20.5 billion.

Exports rose 3.6% compared to a year ago to $63.7 billion, while imports declined by 12.6% to $84.1 billion, the Trade Ministry said.

In March alone, the foreign trade gap narrowed 10.3% year-over-year to $7.52 billion. Exports fell 4.1% to $22.6 billion. Imports dropped by 5.7% to $30.1 billion, the data showed.

The 12-month rolling foreign trade deficit has decreased to $92 billion as of March, compared to as high as $122.2 billion in May 2023.

Şimşek said the foreign trade gap narrowed by $14.3 billion during the first quarter, and Türkiye will accumulate its reserves by decreasing the current account deficit to gross domestic product (GDP) ratio to below 2.5%.

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.

Şimşek said Türkiye aims to reduce the shortfall even below its medium-term-program target of $34.7 billion in 2024.

“With the contribution of the rebalancing in growth, the declining current account deficit and our need for foreign exchange and the increasing inflow of external resources strengthen our macro financial stability,” Şimşek wrote on social media platform X, formerly known as Twitter.

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, down from $48.8 billion in 2022.

The annualized current account deficit decreased by $22.6 billion this January compared to May 2023, reaching $37.5 billion.