Balance of payments gave a surplus of USD 186 million in October. While the deficit in the January-October period decreased to USD 40.68 billion, the downward trend in the annualized deficit continued in October. The 12-month deficit, which was USD 51.74 billion in September, declined to USD 50.74 billion in October. In October, net inflows from direct investments remained at 638 million dollars, while portfolio investments recorded a net outflow of 689 million dollars.
While the balance of payments surplus was expected to be around 750 million dollars in October, it gave a surplus of 182 million dollars. Experts emphasized that net travel revenues declined more than expected, while domestic expenditures abroad were effective in the decline.
The current account balance, which posted a deficit of USD 815 million in October last year, turned into a surplus this year. Economists cited higher-than-expected foreign transfers, tourism expenditures of locals abroad and the outflow in net errors and omissions as the reasons for the current account surplus to remain below expectations. Net travel revenues declined for the first time this year, down 1.2 percent from October last year. On the other hand, the current account balance posted a surplus for the third time this year, following USD 717 million in June and USD 1.91 billion in October.
According to Central Bank data, the current account surplus excluding gold decreased to USD 1.4 billion in October from USD 2.2 billion in October last year and the current account surplus excluding energy decreased to USD 3.8 billion from USD 5.1 billion. This year, the 12-month total current account deficit, which was USD 51.7 billion in September, decreased to USD 50.7 billion in October, while the 11-month current account deficit was calculated at USD 40.7 billion. Experts also noted that the decline in energy costs and the decline in gold imports were effective in the decline in the current account deficit. The current account surplus excluding energy and gold fell to USD 34.9 billion from USD 38 billion in September.
Tourism revenues declined for the first time this year
The current account balance, which posted a deficit last year, posted a surplus this year due to the 6.7 percent increase in total exports of goods while imports declined by 0.6 percent. In October, according to Central Bank data, exports outperformed imports in the balance of payments definition. The foreign trade deficit also narrowed by USD 1.6 billion year-on-year to USD 4.87 billion. In addition to the weakness in transportation revenues, the decline in net travel revenues led to a decline in the services account. Net transportation revenues fell by 14.4 percent and tourism revenues by 1.2 percent compared to October last year. Thus, tourism revenues declined for the first time this year. The surplus in the balance of services, which was USD 6.3 billion in October last year, realized at USD 6 billion in October this year.
USD 223 million of real estate investment from foreigners
According to Central Bank data, while foreign investors invested 223 million dollars in real estate in October, there was a total inflow of 638 million dollars in direct investment. In October, foreigners sold net USD 423 million from stocks and net USD 16 million from government domestic debt securities. Analysts stated that the eurobonds issued by banks abroad partially limited the outflow from the portfolio investments item in total, but there was an outflow of USD 689 million due to the portfolio investments of banks and other sectors abroad. In October, long-term net borrowing of USD 36 million and short-term net borrowing of USD 1.3 billion was made. The long-term debt rollover ratio in the banking sector was 119.6 percent, while in other sectors and in total it was 86.7 percent and 98.7 percent. As of October, the 12-month total debt rollover ratio was 97.8 percent in the banking sector, 99.4 percent in other sectors and 98.5 percent in total. Official reserves increased by only 247 million dollars in October, while the net errors and omissions item posted an outflow of USD 2.7 billion. After a reserve loss of USD 37.7 billion in the first five months of the year, we see a reserve inflow of USD 27 billion in the June-October period.
Increase in reserves remained limited in October
Sakir Turan, Chief Economist at TSKB Economic Research, wrote in a note that the current account balance improved in October due to the decline in foreign trade deficit despite the weakening in services and primary income balance. Turan stated that on the services side, tourism was included in the ongoing weak performance in transportation by slowing down and said, “On the primary income side, the acceleration in investment expenditures had an impact. In the January-October period, the total current account deficit widened by USD 1.7 billion compared to the same period of 2022, reaching USD 40.7 billion. The core surplus decreased by 15.5 billion dollars to 26.6 billion dollars. While a fragile course was observed in capital inflows on the financing side in October, the increase in reserves remained limited despite the increases in inflows from other investments and borrowing item. Preliminary foreign trade data for November showed that the recovery in the foreign trade balance continued in general. Thus, we believe that the improvement in the current account balance may continue in the short term.”
November is the strongest month on the financing front
Serhat Gurleyen, Research Director of IS Investment, stated that the balance of payments data in October showed that the outward rebalancing in the economy continued at a slower pace and said, “A current account balance that remained in the positive area, even if it remained below expectations, a slowdown in financing inflows compared to September and net errors and omissions outflows that have been continuing for two months draw attention.” Gürleyen noted that the core current account surplus, which excludes gold and energy imports, fell to USD 5.1 billion, the lowest level in the last three months, and wrote the following: “In October, the inflow from the financial account fell to USD 2.8 billion, one-third of September’s inflow. In terms of actors, despite the inflow of USD 4 billion from banks, the outflow of USD 1.9 billion from companies is noteworthy. When we analyze the sub-details on a channel basis, we observe an inflow of USD 3.4 billion from currency and deposits, USD 0.4 billion from loans, USD 1 billion from commercial loans and USD 0.7 billion from portfolio investments. When interpreting the outflows on the portfolio side, it should be remembered that October coincided with the Israeli-Palestinian War and peaking US bond yields. On the other hand, on the financing front, November was the strongest period in recent times. When we net out the issuance, redemption and foreign movements in stocks, government domestic debt securities and Eurobonds, we calculate a portfolio inflow of around USD 7.6 billion. According to high-frequency data, the CBRT’s gross reserves increased by USD 10.5 billion in November.”