Turkey has witnessed a significant downturn in its gold imports, marking the smallest volume recorded in nearly two years, which has contributed to a more favorable current account balance than initially projected.
According to recent balance-of-payments data released on Tuesday, net bullion imports have steadily declined over the past five months, reaching $936 million in January. This notable reduction stands in stark contrast to the peak of nearly $5 billion observed just a year ago. The current account, a key indicator of trade and investment interactions with international markets, experienced a deficit of $2.6 billion, slightly lower than economists’ forecasts as surveyed by Bloomberg.
December’s deficit was revised upwards to $2.1 billion. Despite the current account remaining in negative territory for the third consecutive month, the latest figures represent a significant improvement compared to January 2023, when a record deficit exceeding $10 billion was recorded.
Gold purchases have historically exerted pressure on Turkey’s current account, with individuals turning to gold as a hedge against inflation amidst the central bank’s prolonged period of ultra-low interest rates, a strategy championed by President Recep Tayyip Erdogan to stimulate economic growth.
However, the allure of gold has waned following a series of aggressive monetary tightening measures, resulting in higher interest rates on bank deposits and greater stability of the lira. The country’s adoption of more conventional policies since the May elections last year reflects a strategic pivot towards objectives such as maintaining a sustainable current-account deficit.
In January, the trade deficit contracted to $4.4 billion, representing nearly a third of its level from a year prior.
Finance Minister Mehmet Simsek has attributed Turkey’s improving trade dynamics to changes in the growth composition. Notably, the central bank has raised its key interest rate from 8.5% to 45% across eight consecutive meetings, effectively curbing domestic spending and reducing demand for imports.
Simsek anticipates further narrowing of the current-account deficit, a longstanding source of vulnerability for Turkey’s economy and a factor weighing on the lira, projecting an annualized range of $30 billion to $35 billion in the coming months.
