Turkey's current-account balance improves

Turkey recorded impressive current-account numbers yesterday, although the general trend had been anticipated by the markets and hence, the lira did not benefit much. 

"We forecast USD-TRY in the 2.85 region by year-end: the lira had a positive day, of course, as did most EM, but the generic rally masked the lira's underperformance of key peers such as the rand - TRY-ZAR closed the day lower despite the supportive current-account data", says Commerzbank. 

The current-account gap has been narrowing as expected, helped by contracting import demand, lower oil and commodity prices; we forecast 4.5% of GDP deficit for 2015 as a whole. Including the August data, the running 4-quarter average is still c.5%. 

A number of factors helped in combination during August: e.g. real export growth was 8%y/y even while imports contracted; preliminary data suggest, however, that exports had a much worse month in September. 

FDI inflow has been punchy this year, in August, net FDI inflow of c.$2bn recorded, compared to $1.1bn net outflow a year ago. Portfolio capital continued to exit Turkey on diminishing risk appetite; August saw further $1.5bn outflow, taking the YTD total to $8.8bn net negative.